Emergency funds: 6 months saved in HYSA
Debt: $337k in mortgage at 5.125%, no other debt
Tax Filing Status: MFJ
Tax Rate: 22% Federal, 0% State
State of Residence: TX
Age: 36
Desired Asset allocation: 75% stocks / 25% bonds
Desired International allocation: 40% of stocks
$1M portfolio
Current retirement assets
Taxable
0% cash (for investing – do not include emergency funds)
11% VTI (0.03%)
6% VXUS (0.08%)
6% BND (0.03%)
2% BNDX (0.07%)
His 401k (terminated employer) at Empower
62% custom Vanguard TDF 2050 (0.05% ER)
His 401k (new employer) at Vanguard
No investments yet
His Roth IRA at Vanguard
2% VXUS (0.08%)
His HSA
12% VFIFX (0.08%)
529 plans are not listed, but would make up about 12% of portfolio if I included, invested in Vanguard Target Enrollment 2034-2039 Portfolio (~0.14%)
_______________________________________________________________
Contributions
New annual Contributions
$47,500 his 401k (includes $17,000 employer contribution, $7,000 mega backdoor roth)
$7,000 his Roth IRA (backdoor)
$8,550 HSA
$20,000 taxable (for retirement, not short term goals)
Available funds
All custom funds with no tickers, information captured at link below
https://imgur.com/a/RXt7Yen
Questions:
1. Should I rollover my roth 401k money into my roth IRA, and traditional money to my new 401k, or leave in place? I do backdoor roth, so don't want to rollover all to IRA. The existing 401k expenses seem reasonable (both the expense ratio and the $40 annual record keeping fee).
2. What fund line-up should I invest in for my new 401k? I'm not the most savy when it comes to funds, their evaluation, and diversification. I'm okay being in a TDF, but the expense ratios in my new 401k seem to be high, not to mention they feel inherently conservative (75% stock, 22% bonds and 3% short term reserves for a 2050 target date fund). I'm okay coming up with a 3 fund portfolio and rebalancing over time. Both employer 401k plans have many "custom funds" which make the evaluation hard for me. They do offer a self-brokerage, but there are additional expenses ($50 annually) as well as a limitation of only 50% of the portfolio can be invested in self-brokerage.
3. Related to question 1, should I discontinue Vanguard's Personal Advisor services for my brokerage account due to fees? Unfortunately, they won't provide advice on my 529 plans, or HSA plans, and historically they were not able to provide advice on my old 401k. I'm unsure what this means now that I have a Vanguard 401k. I'm okay paying the fee (0.3%) for current advice, but given I may roll-over a significant amount of money into my Roth IRA, I would prefer not to pay the ongoing fees for this and may switch to a fee-only advisor or just manage myself. They are great when I have a question, but I feel the limited scope of their advice is not ideal for me needing advice on funds across my entire portfolio.
Job Change, time to reevaluate all funds
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deftonezzz
- Posts: 8
- Joined: Fri Jan 03, 2025 2:34 pm
Job Change, time to reevaluate all funds
Last edited by deftonezzz on Thu Jan 09, 2025 7:55 am, edited 4 times in total.
Re: Job Change, time to reevaluate all funds
Welcome!
Some initial comments / questions:
Emergency Funds: How many months worth of expenses are you saving for your emergency fund? 3 mos? 6 mos? more?
Debt: Assume there is no other debt.
Desired Asset Allocation: 75/25 is very reasonable. How did you choose your allocation? Given you age, I would offer that depending on your tolerance for risk, you might consider if you would go higher on stocks. I was 100% stocks until my late 40s. Importantly, you need to know yourself to ensure that you avoid any bad behaviors like selling in a panic during periods of volatility.
Also, I have found bonds more complex than stocks. During our recent bout with inflation. quite a few people were surprised how their bonds performed. Please make sure you understand what you are investing in and educate yourself on the bond / fixed income side.
Your international allocation is exceptionally high. What was your rationale for choosing this? The current guidance is no less than 20% and not more than 40%. Just something to think about.
Retirement Assets:
* 401k: nothing wrong with a target date fund..simple, easy to manage.
* Roth IRA: You want your highest potential investments in Roth. If you believe that is International, then you are good to go.
* HSA: I think of the HSA the same as I do a Roth...highest potential investments...100% stocks.
I have also found that employer HSAs are often lacking in investment options, with fees, etc. You may consider making another HSA account (Fidelity is widely viewed as a top option) where you can then make periodic transfers from your employer HSA to your personal one. You will then have more options and likely overall better setup.
Contributions:
Can you elaborate on your rationale / plan for putting a considerable amount in taxable...versus filling up Mega Backdoor Roth for example? I have never had any interest in taxable as long as I had tax advantaged space available. Eventually, I will want to save a couple of years of cash...but that will be closer to retirement.
Your Questions
1. I have never dealt with backdoor Roth. Generally speaking, I am interested in having simplicity in my portfolio. If there is an opportunity to have fewer accounts while not creating other issues for yourself, I would be interested in that.
2. You have a US and Foreign Stock Index options with fees of 0.01% and 0.06%. I think these are very reasonable / desirable. Keep in mind that you should think about your portfolio as a whole and do not have to have the same investments in each of your accounts. For example, you could simply invest only in the US index fund with this account and get your desired allocation for Intl for example in other accounts. Granted, sometimes it can be a bit difficult is the majority of your contributions are going into your 401k for example and the other accounts can't keep pace. You then simply might end up with more than 1 investment in your 401k for example.
Custom funds and the like...no thanks. When dealing with your employer 401k, you just have to manage the best you can with the options you have (I find the brokerage limitation to be quite annoying for example). Positively, I think you have some good investment options and can make things work with your overall portfolio.
Best wishes.
Some initial comments / questions:
Emergency Funds: How many months worth of expenses are you saving for your emergency fund? 3 mos? 6 mos? more?
Debt: Assume there is no other debt.
Desired Asset Allocation: 75/25 is very reasonable. How did you choose your allocation? Given you age, I would offer that depending on your tolerance for risk, you might consider if you would go higher on stocks. I was 100% stocks until my late 40s. Importantly, you need to know yourself to ensure that you avoid any bad behaviors like selling in a panic during periods of volatility.
Also, I have found bonds more complex than stocks. During our recent bout with inflation. quite a few people were surprised how their bonds performed. Please make sure you understand what you are investing in and educate yourself on the bond / fixed income side.
Your international allocation is exceptionally high. What was your rationale for choosing this? The current guidance is no less than 20% and not more than 40%. Just something to think about.
Retirement Assets:
* 401k: nothing wrong with a target date fund..simple, easy to manage.
* Roth IRA: You want your highest potential investments in Roth. If you believe that is International, then you are good to go.
* HSA: I think of the HSA the same as I do a Roth...highest potential investments...100% stocks.
I have also found that employer HSAs are often lacking in investment options, with fees, etc. You may consider making another HSA account (Fidelity is widely viewed as a top option) where you can then make periodic transfers from your employer HSA to your personal one. You will then have more options and likely overall better setup.
Contributions:
Can you elaborate on your rationale / plan for putting a considerable amount in taxable...versus filling up Mega Backdoor Roth for example? I have never had any interest in taxable as long as I had tax advantaged space available. Eventually, I will want to save a couple of years of cash...but that will be closer to retirement.
Your Questions
1. I have never dealt with backdoor Roth. Generally speaking, I am interested in having simplicity in my portfolio. If there is an opportunity to have fewer accounts while not creating other issues for yourself, I would be interested in that.
2. You have a US and Foreign Stock Index options with fees of 0.01% and 0.06%. I think these are very reasonable / desirable. Keep in mind that you should think about your portfolio as a whole and do not have to have the same investments in each of your accounts. For example, you could simply invest only in the US index fund with this account and get your desired allocation for Intl for example in other accounts. Granted, sometimes it can be a bit difficult is the majority of your contributions are going into your 401k for example and the other accounts can't keep pace. You then simply might end up with more than 1 investment in your 401k for example.
Custom funds and the like...no thanks. When dealing with your employer 401k, you just have to manage the best you can with the options you have (I find the brokerage limitation to be quite annoying for example). Positively, I think you have some good investment options and can make things work with your overall portfolio.
Best wishes.
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deftonezzz
- Posts: 8
- Joined: Fri Jan 03, 2025 2:34 pm
Re: Job Change, time to reevaluate all funds
Thank you. I edited to clarify the emergency fund (6 months), international stock % (I transposed the number here - should be 40%), and debt (no other debt.
On the AA allocation, I struggle with this one quite a bit. I've taken the Vanguard risk tolerance assessment, which recommended 100% stocks, and the IFA Risk Capacity Survey which recommended 90% stocks. I tend to think this is driven by a recency bias of I didn't fully live through the last recession of 2008 with any significant assets. If anything, it comes from Benjamin Graham's guidance and Bogle's guidance of bonds in age, adjusted for slightly more risk tolerance.
On taxable vs. tax advantaged, I only recently gained access to the megabackdoor roth and am still getting used to the idea. I mentally value the flexibility of taxable even if it's not as efficient. Future me may look back and wonder why I didn't take more advantage of the megabackdoor roth, but part of me wonders if I will reconsider spending more of this money given a recent raise.
On the fund line-up, I think that's a great point that I can think about AA across all accounts, even if it means only holding US index fund in 401k due to limitations. Regarding the custom funds, several of these have higher expense ratios, but they also have higher returns (see Foreign All Company Index with 0.06% ER and 4.15% average 10 year return vs. Foreign Company with 0.48% ER and 6.65% average 10 year return, both above the same benchmark fund performance). There is also a similar occurrence for bonds, but these are newer funds and don't have the credibility of a 10 year history. How do I evaluate this?
On the tax-efficiency fund placement, I have read through the wiki on this a few times, and this still makes my head spin. Vanguard Personal Advisor services had placed more of my bond funds in the IRA for tax efficiency purposes, but has recently moved to international - unsure on the rationale here.
On the AA allocation, I struggle with this one quite a bit. I've taken the Vanguard risk tolerance assessment, which recommended 100% stocks, and the IFA Risk Capacity Survey which recommended 90% stocks. I tend to think this is driven by a recency bias of I didn't fully live through the last recession of 2008 with any significant assets. If anything, it comes from Benjamin Graham's guidance and Bogle's guidance of bonds in age, adjusted for slightly more risk tolerance.
On taxable vs. tax advantaged, I only recently gained access to the megabackdoor roth and am still getting used to the idea. I mentally value the flexibility of taxable even if it's not as efficient. Future me may look back and wonder why I didn't take more advantage of the megabackdoor roth, but part of me wonders if I will reconsider spending more of this money given a recent raise.
On the fund line-up, I think that's a great point that I can think about AA across all accounts, even if it means only holding US index fund in 401k due to limitations. Regarding the custom funds, several of these have higher expense ratios, but they also have higher returns (see Foreign All Company Index with 0.06% ER and 4.15% average 10 year return vs. Foreign Company with 0.48% ER and 6.65% average 10 year return, both above the same benchmark fund performance). There is also a similar occurrence for bonds, but these are newer funds and don't have the credibility of a 10 year history. How do I evaluate this?
On the tax-efficiency fund placement, I have read through the wiki on this a few times, and this still makes my head spin. Vanguard Personal Advisor services had placed more of my bond funds in the IRA for tax efficiency purposes, but has recently moved to international - unsure on the rationale here.
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deftonezzz
- Posts: 8
- Joined: Fri Jan 03, 2025 2:34 pm
Re: Job Change, time to reevaluate all funds
Bump for more advice
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dogagility
- Posts: 4033
- Joined: Fri Feb 24, 2017 5:41 am
- Location: Del Boca Vista - Phase 3
Re: Job Change, time to reevaluate all funds
Welcome to the forum. Some suggestions/comments below.
Assuming this taxable account is part of your retirement portfolio, you would consider your taxable, 401k, and IRA as a single entity for asset allocation purposes. Place all of your fixed income (bond funds) in tax efficient accounts (401k and IRA). This would mean selling BND and BNDX in your taxable account and buying a commensurate amount of fixed income in your 401k and/or IRA.
If the HSA is also part of your retirement portfolio (which is a very good idea if you can cash flow health care expenses), then include this account as part of the retirement portfolio for asset allocation purposes.
I suggest taking 7K of the money you are contributing to the taxable account and contribute this to your spouse's IRA (which you should open if your spouse doesn't already have an IRA). Your spouse may be able to make a tax deductible contribution to their IRA.
Your rollover strategy seems fine to me if you can do this. I agree you should not rollover the traditional 401k money into an IRA since you are doing the backdoor Roth contributions.
In your case, investing in a TDF fund would be fine but not optimal. The expense ratios are higher than the standalone funds, and this also slightly complicates maintaining an overall portfolio asset allocation.
You have good choices in your 401k. US Core Bond Index for fixed income. US All Company Index for US equities. Foreign All Company Index for international equities. No need to invest in any other funds in your 401k.
Since you've found this forum, you can certainly DIY invest and save the fee. This is not rocket science.
Holding bonds in a taxable account is not tax efficient due to those funds spinning off more taxable money than stock index funds. https://www.bogleheads.org/wiki/Tax-eff ... _placementdeftonezzz wrote: Fri Jan 03, 2025 4:03 pm Taxable
0% cash (for investing – do not include emergency funds)
11% VTI (0.03%)
6% VXUS (0.08%)
6% BND (0.03%)
2% BNDX (0.07%)
Assuming this taxable account is part of your retirement portfolio, you would consider your taxable, 401k, and IRA as a single entity for asset allocation purposes. Place all of your fixed income (bond funds) in tax efficient accounts (401k and IRA). This would mean selling BND and BNDX in your taxable account and buying a commensurate amount of fixed income in your 401k and/or IRA.
If the HSA is also part of your retirement portfolio (which is a very good idea if you can cash flow health care expenses), then include this account as part of the retirement portfolio for asset allocation purposes.
No HSA contribution?New annual Contributions
$47,500 his 401k (includes $17,000 employer contribution, $7,000 mega backdoor roth)
$7,000 his Roth IRA (backdoor)
$20,000 taxable (for retirement, not short term goals)
I suggest taking 7K of the money you are contributing to the taxable account and contribute this to your spouse's IRA (which you should open if your spouse doesn't already have an IRA). Your spouse may be able to make a tax deductible contribution to their IRA.
I would suggest rolling over your old 401k to reduce the number of accounts you maintain; simplicity is an investing virtue.Questions:
1. Should I rollover my roth 401k money into my roth IRA, and traditional money to my new 401k, or leave in place? I do backdoor roth, so don't want to rollover all to IRA. The existing 401k expenses seem reasonable (both the expense ratio and the $40 annual record keeping fee).
Your rollover strategy seems fine to me if you can do this. I agree you should not rollover the traditional 401k money into an IRA since you are doing the backdoor Roth contributions.
The easy way to select funds is to sort on the expense ratio. Then, select among the funds with the lowest expense ratio to reach your desired asset allocation.2. What fund line-up should I invest in for my new 401k? I'm not the most savy when it comes to funds, their evaluation, and diversification. I'm okay being in a TDF, but the expense ratios in my new 401k seem to be high, not to mention they feel inherently conservative (75% stock, 22% bonds and 3% short term reserves for a 2050 target date fund). I'm okay coming up with a 3 fund portfolio and rebalancing over time. Both employer 401k plans have many "custom funds" which make the evaluation hard for me. They do offer a self-brokerage, but there are additional expenses ($50 annually) as well as a limitation of only 50% of the portfolio can be invested in self-brokerage.
In your case, investing in a TDF fund would be fine but not optimal. The expense ratios are higher than the standalone funds, and this also slightly complicates maintaining an overall portfolio asset allocation.
You have good choices in your 401k. US Core Bond Index for fixed income. US All Company Index for US equities. Foreign All Company Index for international equities. No need to invest in any other funds in your 401k.
What benefit is Vanguard PAS providing to you for the fee? Doesn't sound like they are providing what you need.3. Related to question 1, should I discontinue Vanguard's Personal Advisor services for my brokerage account due to fees? Unfortunately, they won't provide advice on my 529 plans, or HSA plans, and historically they were not able to provide advice on my old 401k. I'm unsure what this means now that I have a Vanguard 401k. I'm okay paying the fee (0.3%) for current advice, but given I may roll-over a significant amount of money into my Roth IRA, I would prefer not to pay the ongoing fees for this and may switch to a fee-only advisor or just manage myself. They are great when I have a question, but I feel the limited scope of their advice is not ideal for me needing advice on funds across my entire portfolio.
Since you've found this forum, you can certainly DIY invest and save the fee. This is not rocket science.
tpawplanner.com - Cheers to Ben Mathew and his brother! | Daaaaa Jankees Lose! - David Ortiz
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deftonezzz
- Posts: 8
- Joined: Fri Jan 03, 2025 2:34 pm
Re: Job Change, time to reevaluate all funds
Thank you for the response.
Doesn't this ignore that we want the highest pre-tax returns in our IRA for overall flexibility (tax-free, no RMDs, etc)? I agree with your logic though.dogagility wrote: Thu Jan 09, 2025 6:24 am Holding bonds in a taxable account is not tax efficient due to those funds spinning off more taxable money than stock index funds. https://www.bogleheads.org/wiki/Tax-eff ... _placement
Assuming this taxable account is part of your retirement portfolio, you would consider your taxable, 401k, and IRA as a single entity for asset allocation purposes. Place all of your fixed income (bond funds) in tax efficient accounts (401k and IRA). This would mean selling BND and BNDX in your taxable account and buying a commensurate amount of fixed income in your 401k and/or IRA.
I edited to clarify, thanks - yes, contributing max ($8,550).No HSA contribution?
Thanks for this - my spouse does not have an IRA. I've read the spousal IRA rules a few times, and this never fully clicked; I was thinking the spouse needed earned income for a spousal IRA but perhaps this is not the case. Regarding tax deductible contributions, if I'm understanding correctly, MAGI must be below $143k for 2024 for MFJ. In that case, this would be another Roth IRA as I expect our MAGI to be ~$225k for 2025 https://www.irs.gov/retirement-plans/pl ... an-at-workI suggest taking 7K of the money you are contributing to the taxable account and contribute this to your spouse's IRA (which you should open if your spouse doesn't already have an IRA). Your spouse may be able to make a tax deductible contribution to their IRA.
What do you make of the fact that several have higher expense ratios, but also higher returns? See Foreign All Company Index with 0.06% ER and 4.15% average 10 year return vs. Foreign Company with 0.48% ER and 6.65% average 10 year return, both above the same benchmark fund performance. There is also a similar occurrence for bonds, but these are newer funds and don't have the credibility of a 10 year history. How do I evaluate this?You have good choices in your 401k. US Core Bond Index for fixed income. US All Company Index for US equities. Foreign All Company Index for international equities. No need to invest in any other funds in your 401k.
Re: Job Change, time to reevaluate all funds
I would focus on paying off your mortgage. Doing so is like getting a 6.5% after tax guaranteed return. Seems like a no-brainer at that interest rate.
The question isn't at what age I want to retire, it's at what income. |
- George Foreman
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tashnewbie
- Posts: 4498
- Joined: Thu Apr 23, 2020 12:44 pm
Re: Job Change, time to reevaluate all funds
1. Spousal IRA contribution
The thing that stood out to me is that you're not making an IRA contribution for your spouse.
As long as your total household income at least equals the amount you two contribution to IRAs combined, then you can make a "spousal IRA" contribution even though your spouse does not work outside the house/have earned income.
Confirm your marginal tax bracket is 22%. If it is, then you don't need to use the backdoor Roth method. It may be good to continue using that method if you expect your income to increase in the future, so that you never have to worry about whether you're eligible for direct contributions.
Check these for the MAGI brackets for direct Roth IRA contributions and deductibility of Traditional IRA contributions (those brackets are usually identical or close to it for MFJ):
https://www.irs.gov/retirement-plans/pl ... e-for-2024
https://www.irs.gov/retirement-plans/pl ... an-at-work
The Trad. IRA deductibility rules that apply to your spouse are different from those that apply to you, if your spouse is not covered by a workplace retirement plan.
For 2024, as long as your MAGI is <$230k, then you are eligible to make the full $7k Roth IRA contribution directly. No need for the backdoor.
2. Bonds in Taxable
I wouldn't want nominal bond funds in taxable. If you can sell those funds with no or very low tax cost, then that's what I suggest. If it would be too costly to sell, then at the very least stop future contributions and direct dividends to other funds (turn off automatic reinvestment of dividends).
3. Old 401k
Your new 401k plan has good US, international, and bond fund options. If you are comfortable using those instead of a target date fund, then it's up to you whether you want to leave old 401k where it is or transfer Traditional 401k money to current 401k and Roth 401k money to Roth IRA.
I don't think it's worth transferring your traditional 401k money to the new 401k if you plan to use a target date fund because the fund expenses are high compared to your old 401k.
The thing that stood out to me is that you're not making an IRA contribution for your spouse.
As long as your total household income at least equals the amount you two contribution to IRAs combined, then you can make a "spousal IRA" contribution even though your spouse does not work outside the house/have earned income.
Confirm your marginal tax bracket is 22%. If it is, then you don't need to use the backdoor Roth method. It may be good to continue using that method if you expect your income to increase in the future, so that you never have to worry about whether you're eligible for direct contributions.
Check these for the MAGI brackets for direct Roth IRA contributions and deductibility of Traditional IRA contributions (those brackets are usually identical or close to it for MFJ):
https://www.irs.gov/retirement-plans/pl ... e-for-2024
https://www.irs.gov/retirement-plans/pl ... an-at-work
The Trad. IRA deductibility rules that apply to your spouse are different from those that apply to you, if your spouse is not covered by a workplace retirement plan.
For 2024, as long as your MAGI is <$230k, then you are eligible to make the full $7k Roth IRA contribution directly. No need for the backdoor.
2. Bonds in Taxable
I wouldn't want nominal bond funds in taxable. If you can sell those funds with no or very low tax cost, then that's what I suggest. If it would be too costly to sell, then at the very least stop future contributions and direct dividends to other funds (turn off automatic reinvestment of dividends).
3. Old 401k
Your new 401k plan has good US, international, and bond fund options. If you are comfortable using those instead of a target date fund, then it's up to you whether you want to leave old 401k where it is or transfer Traditional 401k money to current 401k and Roth 401k money to Roth IRA.
I don't think it's worth transferring your traditional 401k money to the new 401k if you plan to use a target date fund because the fund expenses are high compared to your old 401k.
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deftonezzz
- Posts: 8
- Joined: Fri Jan 03, 2025 2:34 pm
Re: Job Change, time to reevaluate all funds
I don't follow. Can you share your logic?I would focus on paying off your mortgage. Doing so is like getting a 6.5% after tax guaranteed return. Seems like a no-brainer at that interest rate.
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dogagility
- Posts: 4033
- Joined: Fri Feb 24, 2017 5:41 am
- Location: Del Boca Vista - Phase 3
Re: Job Change, time to reevaluate all funds
It may. The idea here (as I see it) is that reducing taxes paid now increases the amount of money available in your portfolio now for investing over the coming decades.deftonezzz wrote: Thu Jan 09, 2025 8:41 am Doesn't this ignore that we want the highest pre-tax returns in our IRA for overall flexibility (tax-free, no RMDs, etc)? I agree with your logic though.
The link I provided likely has a better explanation of why.
The spouse does not need earned income. https://www.nerdwallet.com/article/inve ... d-open-oneThanks for this - my spouse does not have an IRA. I've read the spousal IRA rules a few times, and this never fully clicked; I was thinking the spouse needed earned income for a spousal IRA but perhaps this is not the case. Regarding tax deductible contributions, if I'm understanding correctly, MAGI must be below $143k for 2024 for MFJ. In that case, this would be another Roth IRA as I expect our MAGI to be ~$225k for 2025
This link shows the income limits for deducting spousal IRA contributions from federal taxes. https://www.nerdwallet.com/article/inve ... ion-limits
The higher expense ratio funds are likely actively managed. You should check on this. In any case, I pay no attention to 1, 5, 10 year comparisons.What do you make of the fact that several have higher expense ratios, but also higher returns? See Foreign All Company Index with 0.06% ER and 4.15% average 10 year return vs. Foreign Company with 0.48% ER and 6.65% average 10 year return, both above the same benchmark fund performance. There is also a similar occurrence for bonds, but these are newer funds and don't have the credibility of a 10 year history. How do I evaluate this?
As a group, actively managed funds are very likely to underperform index funds in the future. There is no way to identify those very few (10%) actively managed funds that might outperform an index fund in the future. Google SPIVA reports for the data and the whys.
The only absolute when comparing funds in the same class is payment of the fee.
tpawplanner.com - Cheers to Ben Mathew and his brother! | Daaaaa Jankees Lose! - David Ortiz
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deftonezzz
- Posts: 8
- Joined: Fri Jan 03, 2025 2:34 pm
Re: Job Change, time to reevaluate all funds
Wow.. I learned something today. I'm a little disappointed I couldn't take advantage of this in the past, but here's to doing better for the future. I won't be able to do anything for 2024, as I did have a higher-than-normal income year that pushed me over the $230k MAGI. I do expect to be under this threshold for 2025.tashnewbie wrote: Thu Jan 09, 2025 9:35 am The Trad. IRA deductibility rules that apply to your spouse are different from those that apply to you, if your spouse is not covered by a workplace retirement plan.
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tashnewbie
- Posts: 4498
- Joined: Thu Apr 23, 2020 12:44 pm
Re: Job Change, time to reevaluate all funds
Still have time to do backdoor Roth for 2024 for you and your spouse. You have until tax filing deadline to make the non-deductible contribution.deftonezzz wrote: Thu Jan 09, 2025 10:08 amWow.. I learned something today. I'm a little disappointed I couldn't take advantage of this in the past, but here's to doing better for the future. I won't be able to do anything for 2024, as I did have a higher-than-normal income year that pushed me over the $230k MAGI. I do expect to be under this threshold for 2025.tashnewbie wrote: Thu Jan 09, 2025 9:35 am The Trad. IRA deductibility rules that apply to your spouse are different from those that apply to you, if your spouse is not covered by a workplace retirement plan.
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dogagility
- Posts: 4033
- Joined: Fri Feb 24, 2017 5:41 am
- Location: Del Boca Vista - Phase 3
Re: Job Change, time to reevaluate all funds
You and your spouse can always contribute to an IRA if you have sufficient earned income.deftonezzz wrote: Thu Jan 09, 2025 10:08 amWow.. I learned something today. I'm a little disappointed I couldn't take advantage of this in the past, but here's to doing better for the future. I won't be able to do anything for 2024, as I did have a higher-than-normal income year that pushed me over the $230k MAGI. I do expect to be under this threshold for 2025.tashnewbie wrote: Thu Jan 09, 2025 9:35 am The Trad. IRA deductibility rules that apply to your spouse are different from those that apply to you, if your spouse is not covered by a workplace retirement plan.
tpawplanner.com - Cheers to Ben Mathew and his brother! | Daaaaa Jankees Lose! - David Ortiz
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deftonezzz
- Posts: 8
- Joined: Fri Jan 03, 2025 2:34 pm
Re: Job Change, time to reevaluate all funds
My mortgage interest is deductible as I itemize. It's a 15 year note, and I have paid down some principal to align the pay-off date with when I may choose to use this cashflow for college (after depleting 529s). I still have about 12 years left, so I am in the phase where there is a disproportionate amount of interest. Specifically, I have paid about 31% of the total interest, and 42% of the total principal. I really don't understand how paying off mortgage would result in anything greater than the interest rate (5.125%), and potentially even less given this is currently tax deductible, but looking to understand your logic.deftonezzz wrote: Thu Jan 09, 2025 9:50 amI don't follow. Can you share your logic?I would focus on paying off your mortgage. Doing so is like getting a 6.5% after tax guaranteed return. Seems like a no-brainer at that interest rate.
Re: Job Change, time to reevaluate all funds
Paying down a mortgage doesn't change the payoff date. It reduces the interest paid and reduces future required payment amounts but not number of future payments. (Assuming you are applying extra to principle).deftonezzz wrote: Fri Jan 10, 2025 10:17 amMy mortgage interest is deductible as I itemize. It's a 15 year note, and I have paid down some principal to align the pay-off date with when I may choose to use this cashflow for college (after depleting 529s). I still have about 12 years left, so I am in the phase where there is a disproportionate amount of interest. Specifically, I have paid about 31% of the total interest, and 42% of the total principal. I really don't understand how paying off mortgage would result in anything greater than the interest rate (5.125%), and potentially even less given this is currently tax deductible, but looking to understand your logic.
If you want to alter the payoff date, you do a recast IIRC.
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deftonezzz
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Re: Job Change, time to reevaluate all funds
I believe you have that backwards. Recast is for changing the payment, while extra principal payments alter overall loan timeline.LotsaGray wrote: Fri Jan 10, 2025 5:09 pm Paying down a mortgage doesn't change the payoff date. It reduces the interest paid and reduces future required payment amounts but not number of future payments. (Assuming you are applying extra to principle).
If you want to alter the payoff date, you do a recast IIRC.