Personal Finance Advice and Education! (3 Viewers)

[wilked]

Thanks, yes I agree a dividend ETF makes better sense than a particular stock. All in all, the in vogue massive emergency fund is just a bunch of fear mongering, IMO. With rates so low and HELOCs easy to set up, more than a couple months is overkill but all I hear is 6 months+. Just think it is ridiculously conservative.

The shark move is to grow brass balls and invest your "emergency fund" in a dividend paying stock that rarely wavers in value (I am looking at you AT&T) and reap some gains from your idle cash. If you have some equity in your house you can open a line of credit to draw from in a true emergency but otherwise just sits there open. Minimal cost HELOC let's you invest that emergency money with less risk of disaster. Note: I am not a professional and you'd have to be crazy to move thousands of dollars on the word of a random FBGS poster.

Honestly this is some of the worst advice I've ever seen in this thread.

A dividend ETF that holds hundreds of stocks... maybe. One or even a handful of single stocks? Potential suicide.

so within a couple posts you have moved from a single stock to a fund of stocks, give it another page and you will be on board with 6 months in a savings account

 

[FUBAR]

Thanks, yes I agree a dividend ETF makes better sense than a particular stock. All in all, the in vogue massive emergency fund is just a bunch of fear mongering, IMO. With rates so low and HELOCs easy to set up, more than a couple months is overkill but all I hear is 6 months+. Just think it is ridiculously conservative.

The shark move is to grow brass balls and invest your "emergency fund" in a dividend paying stock that rarely wavers in value (I am looking at you AT&T) and reap some gains from your idle cash. If you have some equity in your house you can open a line of credit to draw from in a true emergency but otherwise just sits there open. Minimal cost HELOC let's you invest that emergency money with less risk of disaster. Note: I am not a professional and you'd have to be crazy to move thousands of dollars on the word of a random FBGS poster.

Honestly this is some of the worst advice I've ever seen in this thread.

A dividend ETF that holds hundreds of stocks... maybe. One or even a handful of single stocks? Potential suicide.

I realize I'll sound like I'm not taking my own advice, but think of it like vehicle or life insurance. Most likely and hopefully you'll never need it, hopefully you'll lose money by having it. But the risk of not having it is huge.

 

[pecorino]

Thanks, yes I agree a dividend ETF makes better sense than a particular stock. All in all, the in vogue massive emergency fund is just a bunch of fear mongering, IMO. With rates so low and HELOCs easy to set up, more than a couple months is overkill but all I hear is 6 months+. Just think it is ridiculously conservative.

The shark move is to grow brass balls and invest your "emergency fund" in a dividend paying stock that rarely wavers in value (I am looking at you AT&T) and reap some gains from your idle cash. If you have some equity in your house you can open a line of credit to draw from in a true emergency but otherwise just sits there open. Minimal cost HELOC let's you invest that emergency money with less risk of disaster. Note: I am not a professional and you'd have to be crazy to move thousands of dollars on the word of a random FBGS poster.

Honestly this is some of the worst advice I've ever seen in this thread.

A dividend ETF that holds hundreds of stocks... maybe. One or even a handful of single stocks? Potential suicide.

so within a couple posts you have moved from a single stock to a fund of stocks, give it another page and you will be on board with 6 months in a savings account

Now that would be silly. But maybe an index fund...

My point is that rates are so low that there is not a huge risk in forgoing the prescribed 6-month emergency fund. It's not popular opinion and I've been known to give the worst advice on this board so read a lot and think for yourself.

 

[ghostguy123]

Thanks, yes I agree a dividend ETF makes better sense than a particular stock. All in all, the in vogue massive emergency fund is just a bunch of fear mongering, IMO. With rates so low and HELOCs easy to set up, more than a couple months is overkill but all I hear is 6 months+. Just think it is ridiculously conservative.

The shark move is to grow brass balls and invest your "emergency fund" in a dividend paying stock that rarely wavers in value (I am looking at you AT&T) and reap some gains from your idle cash. If you have some equity in your house you can open a line of credit to draw from in a true emergency but otherwise just sits there open. Minimal cost HELOC let's you invest that emergency money with less risk of disaster. Note: I am not a professional and you'd have to be crazy to move thousands of dollars on the word of a random FBGS poster.

Honestly this is some of the worst advice I've ever seen in this thread.

A dividend ETF that holds hundreds of stocks... maybe. One or even a handful of single stocks? Potential suicide.

I realize I'll sound like I'm not taking my own advice, but think of it like vehicle or life insurance. Most likely and hopefully you'll never need it, hopefully you'll lose money by having it. But the risk of not having it is huge.

Ok, so lets say you have 25 grand in savings. And you decide to get "risky" and put as much as would be allowable in your 403b and your wife's 403b to max out the contributions, basically wiping out your savings over the course of the next couple years or so (say you keep about 5 grand available in savings).

Now lets say disaster strikes and you want to liquify 20 grand from that 403b. How much would you actually have to withdraw from the funds to get 20 grand cash.

If this happens, you will obviously lose out on some early withdrawal fees. Taxes shouldnt be much of a factor since the money wasn't taxed when it went in.

Question is, would the benefits of increasing the retirement funds outweigh the cost of withdrawing that same amount if disaster strikes? The odds of disaster are pretty low, so is a few grand withdrawal penalty really all that terrible given the low probability of disaster and the very high probability that money works positively for you?

Now factor in time. If you put that money into the 403b funds and then disaster strikes 5 years later, would the money you earned from that extra 20 grand over those 5 years be more or less than the cost of of withdrawing that same 20 grand?

Basically the way I am looking at it is the reverse of the "insurance" analogy. I can always withdraw the same amount that I put in. The penalty would be my insurance payment, except I don't have to pay for that insurance unless a very low probability disaster were to happen.

Sorry if I am rambling. Thinking this through out loud.

 

[pecorino]

Put it into a Roth so you can get at the principal with no penalty, not a 401k or 403b.

 

[RUSF18]

My wife started a new job a few months ago where she is eligible for a pension after X years but there is no 401k/403b type account offered. Is there any other method for funding an IRA (which I know I'd need to setup separately) with pre-tax dollars from every paycheck, or is this something I would need to fund all at once and then figure out when doing our taxes this year?

I have a pretty decent knowledge on how these things work generally but that's after 10+ years of funding these with payroll deductions or lump sum Roth contributions, so this is new to me.

Thanks.

 

[eoMMan]

My wife started a new job a few months ago where she is eligible for a pension after X years but there is no 401k/403b type account offered. Is there any other method for funding an IRA (which I know I'd need to setup separately) with pre-tax dollars from every paycheck, or is this something I would need to fund all at once and then figure out when doing our taxes this year?

I have a pretty decent knowledge on how these things work generally but that's after 10+ years of funding these with payroll deductions or lump sum Roth contributions, so this is new to me.

Thanks.

I don't think it can be set up to come your paycheck.....which would be your employer. You would need to set up auto drafts from your IRA company. Mine just drafts automatically on the same day each month and I'll obviously get the deduction when I do my taxes.

Just take note of how much is being drafted so you don't go over your annual limits.

 

[eoMMan]

Not sure if this has been discussed or not, but everywhere I see any financial advice it mentions an emergency fund, then talks about an amount anywhere from a couple months to 6 or more months of living expenses.

In my current situation I have a good size emergency fund, but the money is just sitting in my bank account doing nothing. I have a stable job, so would it make sense for me to basically use just about all of that emergency fund and put it towards my mortgage?

I have just been wondering lately if that emergency fund is a very overrated thing to have, and is it costing me a lot of money in the long run? I mean, I KNOW it is definitely costing me money in the long run on the amount of interest I am paying on my mortgage, although I do understand how it could come in handy if some sort of emergency does come up.

Is the shark move to put it towards the house? Just wondering the philosophy on this. Situations are different, I get that. Depending on your line of work you might HAVE to keep an emergency fund because you go through stretches of down time. In my case, my income is a stable amount with annual raises, and I would rate my job security as high.

What are you going to do if you wreck your car and need another one tomorrow?

What if an AMAZING opportunity comes to buy something at pennies on the dollar because of someone else's misfortune and you need 25-30K TOMORROW?

What are you going to do if a massive foundation problem arises and you need 20K to fix it tomorrow?

What if you child gets kidnapped and you need 50k for ransom?

What if all that happens simultaneously while you are sick, in the hospital, and just got a pink slip?

I like 18 mo. 9 months ultra liquid meaning i have it TODAY or tomorrow. 9 mo. invested in income generating low volatity assets like baby bonds (exchange traded debt) or bond ETFs.

If you've got under 100K ready and available you're probably going to miss out on an opportunity in life... and that's not worth risking a few interest points on a loan, or invested in some individual stock.

I'm all for people having emergency funds but needing 25k to 30k for the very next day? Come on, now.

 

[Chadstroma]

Not sure if this has been discussed or not, but everywhere I see any financial advice it mentions an emergency fund, then talks about an amount anywhere from a couple months to 6 or more months of living expenses.

In my current situation I have a good size emergency fund, but the money is just sitting in my bank account doing nothing. I have a stable job, so would it make sense for me to basically use just about all of that emergency fund and put it towards my mortgage?

I have just been wondering lately if that emergency fund is a very overrated thing to have, and is it costing me a lot of money in the long run? I mean, I KNOW it is definitely costing me money in the long run on the amount of interest I am paying on my mortgage, although I do understand how it could come in handy if some sort of emergency does come up.

Is the shark move to put it towards the house? Just wondering the philosophy on this. Situations are different, I get that. Depending on your line of work you might HAVE to keep an emergency fund because you go through stretches of down time. In my case, my income is a stable amount with annual raises, and I would rate my job security as high.

What are you going to do if you wreck your car and need another one tomorrow?

What if an AMAZING opportunity comes to buy something at pennies on the dollar because of someone else's misfortune and you need 25-30K TOMORROW?

What are you going to do if a massive foundation problem arises and you need 20K to fix it tomorrow?

What if you child gets kidnapped and you need 50k for ransom?

What if all that happens simultaneously while you are sick, in the hospital, and just got a pink slip?

I like 18 mo. 9 months ultra liquid meaning i have it TODAY or tomorrow. 9 mo. invested in income generating low volatity assets like baby bonds (exchange traded debt) or bond ETFs.

If you've got under 100K ready and available you're probably going to miss out on an opportunity in life... and that's not worth risking a few interest points on a loan, or invested in some individual stock.

I'm all for people having emergency funds but needing 25k to 30k for the very next day? Come on, now.

Everything is subjective when it comes to personal finance. For one person- what you think it is a good amount of money to have in an emergency fund may seem like a lot of money while another would think it was a small amount. There are a lot of variables that really change from one person to the next.

 

[eoMMan]

Not sure if this has been discussed or not, but everywhere I see any financial advice it mentions an emergency fund, then talks about an amount anywhere from a couple months to 6 or more months of living expenses.

In my current situation I have a good size emergency fund, but the money is just sitting in my bank account doing nothing. I have a stable job, so would it make sense for me to basically use just about all of that emergency fund and put it towards my mortgage?

I have just been wondering lately if that emergency fund is a very overrated thing to have, and is it costing me a lot of money in the long run? I mean, I KNOW it is definitely costing me money in the long run on the amount of interest I am paying on my mortgage, although I do understand how it could come in handy if some sort of emergency does come up.

Is the shark move to put it towards the house? Just wondering the philosophy on this. Situations are different, I get that. Depending on your line of work you might HAVE to keep an emergency fund because you go through stretches of down time. In my case, my income is a stable amount with annual raises, and I would rate my job security as high.

What are you going to do if you wreck your car and need another one tomorrow?

What if an AMAZING opportunity comes to buy something at pennies on the dollar because of someone else's misfortune and you need 25-30K TOMORROW?

What are you going to do if a massive foundation problem arises and you need 20K to fix it tomorrow?

What if you child gets kidnapped and you need 50k for ransom?

What if all that happens simultaneously while you are sick, in the hospital, and just got a pink slip?

I like 18 mo. 9 months ultra liquid meaning i have it TODAY or tomorrow. 9 mo. invested in income generating low volatity assets like baby bonds (exchange traded debt) or bond ETFs.

If you've got under 100K ready and available you're probably going to miss out on an opportunity in life... and that's not worth risking a few interest points on a loan, or invested in some individual stock.

I'm all for people having emergency funds but needing 25k to 30k for the very next day? Come on, now.

Everything is subjective when it comes to personal finance. For one person- what you think it is a good amount of money to have in an emergency fund may seem like a lot of money while another would think it was a small amount. There are a lot of variables that really change from one person to the next.

What emergency would require 25k? Paying ransom? Bail (if bail is considered, 25k could be woefully low)?

 

[FUBAR]

What are you going to do if you wreck your car and need another one tomorrow?

- insurance would cover the cost for the rental and I can go a while without a car if neccessary.

What if an AMAZING opportunity comes to buy something at pennies on the dollar because of someone else's misfortune and you need 25-30K TOMORROW?

- Be specific here. What exactly might I miss out on?

What are you going to do if a massive foundation problem arises and you need 20K to fix it tomorrow?

- Is this how construction companies work? Pretty sure there would be a grace period here.

What if you child gets kidnapped and you need 50k for ransom?

- go all Liam Neeson on their asses.

What if all that happens simultaneously while you are sick, in the hospital, and just got a pink slip?

- literally impossible.

I like 18 mo. 9 months ultra liquid meaning i have it TODAY or tomorrow. 9 mo. invested in income generating low volatity assets like baby bonds (exchange traded debt) or bond ETFs.

- You're ultra conservative. Good for you if it works for you. But I see no reason to have 9 months cash sitting around. Even with your hypothetical situations, it's not 9 months you want, it's enough to cover your contingencies.

If you've got under 100K ready and available you're probably going to miss out on an opportunity in life... and that's not worth risking a few interest points on a loan, or invested in some individual stock.

- You're There literally is no situation where I'd need to pull out 100k tomorrow where I wouldn't be willing to take out a loan. And maybe a 1% chance of the situation arising prompting me to take the loan.

 

[Rick James]

I am in 401k rollover limbo. In September I left Company A for Company B. After a few weeks I initiated the 401k rollover process into my new employer's account. A few weeks go by, and I'm miserable at company B. I pull the cord and get my old job back at company A.

I get a substantial check in the mail and a note saying that company B couldn't get all of the necessary info from company A to complete the rollover, so here's a check (note- not made out to me).

I've already tried calling the original 401k provider to see if they can just cancel the check and re-issue and deposit back into their account for me. They say that i need to proceed w/ the rollover directly with the other provider. This prompted a phone call with THAT provider, and they say since I'm no longer employed with company B they can't deposit the check.

so wtf do I do here? I gotta think there's a way for the original provider to handle this

 

[eoMMan]

I am in 401k rollover limbo. In September I left Company A for Company B. After a few weeks I initiated the 401k rollover process into my new employer's account. A few weeks go by, and I'm miserable at company B. I pull the cord and get my old job back at company A.

I get a substantial check in the mail and a note saying that company B couldn't get all of the necessary info from company A to complete the rollover, so here's a check (note- not made out to me).

I've already tried calling the original 401k provider to see if they can just cancel the check and re-issue and deposit back into their account for me. They say that i need to proceed w/ the rollover directly with the other provider. This prompted a phone call with THAT provider, and they say since I'm no longer employed with company B they can't deposit the check.

so wtf do I do here? I gotta think there's a way for the original provider to handle this

Can you open an IRA account and have the original 401k company issue a new check there instead?

Good luck. As you found, it's usually a bad a idea rolling over a 401k into a new employer's 401k.

 

[Rick James]

I do have a vanguard IRA...i'll give that a shot

 

[Chadstroma]

I am in 401k rollover limbo. In September I left Company A for Company B. After a few weeks I initiated the 401k rollover process into my new employer's account. A few weeks go by, and I'm miserable at company B. I pull the cord and get my old job back at company A.

I get a substantial check in the mail and a note saying that company B couldn't get all of the necessary info from company A to complete the rollover, so here's a check (note- not made out to me).

I've already tried calling the original 401k provider to see if they can just cancel the check and re-issue and deposit back into their account for me. They say that i need to proceed w/ the rollover directly with the other provider. This prompted a phone call with THAT provider, and they say since I'm no longer employed with company B they can't deposit the check.

so wtf do I do here? I gotta think there's a way for the original provider to handle this

Can you open an IRA account and have the original 401k company issue a new check there instead?

Good luck. As you found, it's usually a bad a idea rolling over a 401k into a new employer's 401k.

The check is done as a direct transfer so he can't deposit it anywhere other than where it was intended on going.

The old employer should be able to cancel and cut a new check as a rollover (assuming you have not done any other rollovers in the calendar year). I would cause a big stink with the old employer 401k administrator to get them to do it or get them to do a direct transfer to a new plan (IRA- set one up yourself).

 

[RUSF18]

My wife started a new job a few months ago where she is eligible for a pension after X years but there is no 401k/403b type account offered. Is there any other method for funding an IRA (which I know I'd need to setup separately) with pre-tax dollars from every paycheck, or is this something I would need to fund all at once and then figure out when doing our taxes this year?

I have a pretty decent knowledge on how these things work generally but that's after 10+ years of funding these with payroll deductions or lump sum Roth contributions, so this is new to me.

Thanks.

I don't think it can be set up to come your paycheck.....which would be your employer. You would need to set up auto drafts from your IRA company. Mine just drafts automatically on the same day each month and I'll obviously get the deduction when I do my taxes.

Just take note of how much is being drafted so you don't go over your annual limits.

Thanks. That's about what I figured. Now I just have to make sure I don't go into default mode and skip over that question on TurboTax when it gets asked.

 

[Juxtatarot]

The moral of that story is never transfer from one 401K to another. Roll it over into an IRA instead.

 

[George Jefferson Airplane]

The moral of that story is never transfer from one 401K to another. Roll it over into an IRA instead.

Guy I work with left his company and neither he nor the company knew what they were doing. They sent him a check with his 401k money, he cashed it, then tried to open an IRA at Fidelity. When Fidelity told him he'd have to pay taxes on the money, he flipped out. Not taking a direct distribution seems like something that is widely known, but this happens to more people than you'd think.

 

[Chadstroma]

The moral of that story is never transfer from one 401K to another. Roll it over into an IRA instead.

Guy I work with left his company and neither he nor the company knew what they were doing. They sent him a check with his 401k money, he cashed it, then tried to open an IRA at Fidelity. When Fidelity told him he'd have to pay taxes on the money, he flipped out. Not taking a direct distribution seems like something that is widely known, but this happens to more people than you'd think.

You can do direct transfer/rollover (check is payable to the institution that has the IRA/401k you are taking it to with FBO your name). You also have the ability to do a rollover (check is payable to you) once a year and have 60 days to put that money into a qualifying plan. As long as he deposited the same amount into an IRA there should not have been any tax issues as a 60 day rollover.

 

[Kid_kong]

A few keys I ilve by, but remember to always pay yourself first. That 20% number is a good one, but the whole idea is to make work optional one day.

1.) Create a reserve account that you never touch. Start by having 3 months of expenses and then gradually grow to a year. Index this as your income and obligations grow. You'll be happy you did this.

2.) Once you have 3 months reserve you can start with your long term savings plans: Qualified Plans - 401k, IRA...et cetera. These are good ways to defer your tax, but beware because it also defers the tax calculation. Non Qualified Plans - talk to your advisor. These are long term savings plans.

Closely held businesses and real estate - this is for when you have a year of expenses and can afford to lose (less than 20% of your annual savings)

Review your plan every year. Work with a professional who will remind you what you're doing. There will be plenty of times you need to be talked down...

 

[Doctor Detroit]

I think that's more the Dave Ramsey approach but I'm fine with it.

To me before paying off debt, before an emergency cash reserve, and before really anything else you contribute enough to your 401k to get the match if one is offered. Free money is the best kind of money, and leaving even $1 on the table is a serious oversight IMO. After that do whatever you want IMO, all those things you listed are important.

 

[Balco]

I have a heloc at 2.5% interest rate. That is my emergency fund (along with credit cards). I also put 500 a month in Vanguard Life Strategy Conservative Growth Fund.(vscgx).

 

[Chadstroma]

I have a heloc at 2.5% interest rate. That is my emergency fund (along with credit cards). I also put 500 a month in Vanguard Life Strategy Conservative Growth Fund.(vscgx).

How long ago did you set that up? That rate usually indicates it was 8-10 years ago and that you are coming up on your draw period. Either that or your area still has great rates and/or you found a really good deal.

 

[FUBAR]

I think that's more the Dave Ramsey approach but I'm fine with it.

To me before paying off debt, before an emergency cash reserve, and before really anything else you contribute enough to your 401k to get the match if one is offered. Free money is the best kind of money, and leaving even $1 on the table is a serious oversight IMO. After that do whatever you want IMO, all those things you listed are important.

Agreed. We don't have that option, but if we did I'd max the match and stay in non cc debt if that was the choice.

 

[wilked]

I have a heloc at 2.5% interest rate. That is my emergency fund (along with credit cards). I also put 500 a month in Vanguard Life Strategy Conservative Growth Fund.(vscgx).

Here's one reason why this is a bad idea.

One type of emergency - losing your job

One typical reason that banks close HELOCs - losing your job

Put them together - bad strategy

 

[Juxtatarot]

I have a heloc at 2.5% interest rate. That is my emergency fund (along with credit cards). I also put 500 a month in Vanguard Life Strategy Conservative Growth Fund.(vscgx).

Here's one reason why this is a bad idea.

One type of emergency - losing your job

One typical reason that banks close HELOCs - losing your job

Put them together - bad strategy

I have not heard of banks proactively searching/requesting income information while the credit line is open. This happens? It would happen for a request to renew a line, of course. I also know it can happen if a borrower's credit deteriorates or collateral depreciates. But if a borrower's credit stays good and CLTV stays fine?

 

[Chadstroma]

I have a heloc at 2.5% interest rate. That is my emergency fund (along with credit cards). I also put 500 a month in Vanguard Life Strategy Conservative Growth Fund.(vscgx).

Here's one reason why this is a bad idea.

One type of emergency - losing your job

One typical reason that banks close HELOCs - losing your job

Put them together - bad strategy

I have not heard of banks proactively searching/requesting income information while the credit line is open. This happens? It would happen for a request to renew a line, of course. I also know it can happen if a borrower's credit deteriorates or collateral depreciates. But if a borrower's credit stays good and CLTV stays fine?

I am unaware of any banks that do this simply for losing your job. I am not sure how they would ever know that you lost your job. Banks do verification of employment at application but I don't know of any that do any kind of periodic checks afterwards.

Now, if you don't pay on time (a result of losing your job) then the line can go into default and most banks will put that line into paydown status- closing the draw period.

 

[Dentist]

What are you going to do if you wreck your car and need another one tomorrow?

- insurance would cover the cost for the rental and I can go a while without a car if neccessary.

I'm glad you can get by without a car, but most people need a car ASAP and you certainly don't want to take a loan out for a vehicle because that's stupid.. so you need the full amount. I'll accept buying a used dilapidated car if you must, but you're gonna need at least 10K here.

What if an AMAZING opportunity comes to buy something at pennies on the dollar because of someone else's misfortune and you need 25-30K TOMORROW?

- Be specific here. What exactly might I miss out on?

A friend or family member has to sell their car asap because they need cash immediately due to not following my guidelines.. this is an opportune time to take advantage of someone down on their luck. A quick inspection and analysis says the car is worth 25K easily but for anyone with cash they'll part with it for 17k. You pay the cash, flip the car easily, and profit immensely simply for having cash on hand.

What are you going to do if a massive foundation problem arises and you need 20K to fix it tomorrow?

- Is this how construction companies work? Pretty sure there would be a grace period here.

Anytime i've done any work i needed a pretty good amount up front, then some at the end. Given that the amount of time this project will take is short, you better have your money ready soon.. if not tomorrow.. at least within a few weeks.

What if you child gets kidnapped and you need 50k for ransom?

- go all Liam Neeson on their asses.

I don't believe in violence, so i'm going to pay and move on with my life.. hopefully it's in tact.

What if all that happens simultaneously while you are sick, in the hospital, and just got a pink slip?

- literally impossible.

maybe the example is a bit extreme.... but a lot of people go under by getting hit with a blow of medical bills plus transmission blows plus need a root canal or something... sometimes bad crap happens without spacing it out properly to let your savings rebuild.

I like 18 mo. 9 months ultra liquid meaning i have it TODAY or tomorrow. 9 mo. invested in income generating low volatity assets like baby bonds (exchange traded debt) or bond ETFs.

- You're ultra conservative. Good for you if it works for you. But I see no reason to have 9 months cash sitting around. Even with your hypothetical situations, it's not 9 months you want, it's enough to cover your contingencies.

I'm already HEAVILY invested in the stock market. I'm pro investment. But at some point you just need money around. Otherwise what are you going to do with it... waste it on good or services you neither need or want?

If you've got under 100K ready and available you're probably going to miss out on an opportunity in life... and that's not worth risking a few interest points on a loan, or invested in some individual stock.

- You're There literally is no situation where I'd need to pull out 100k tomorrow where I wouldn't be willing to take out a loan. And maybe a 1% chance of the situation arising prompting me to take the loan.

Fine, I'll concede that. But it's far better for people to over-save than under-save... and 95% under-save. The ability to save properly or even over-save is a really 1% type of problem.

 

[FUBAR]

What are you going to do if you wreck your car and need another one tomorrow?

- insurance would cover the cost for the rental and I can go a while without a car if neccessary.

I'm glad you can get by without a car, but most people need a car ASAP and you certainly don't want to take a loan out for a vehicle because that's stupid.. so you need the full amount. I'll accept buying a used dilapidated car if you must, but you're gonna need at least 10K here.

What if an AMAZING opportunity comes to buy something at pennies on the dollar because of someone else's misfortune and you need 25-30K TOMORROW?

- Be specific here. What exactly might I miss out on?

A friend or family member has to sell their car asap because they need cash immediately due to not following my guidelines.. this is an opportune time to take advantage of someone down on their luck. A quick inspection and analysis says the car is worth 25K easily but for anyone with cash they'll part with it for 17k. You pay the cash, flip the car easily, and profit immensely simply for having cash on hand.

What are you going to do if a massive foundation problem arises and you need 20K to fix it tomorrow?

- Is this how construction companies work? Pretty sure there would be a grace period here.

Anytime i've done any work i needed a pretty good amount up front, then some at the end. Given that the amount of time this project will take is short, you better have your money ready soon.. if not tomorrow.. at least within a few weeks.

What if you child gets kidnapped and you need 50k for ransom?

- go all Liam Neeson on their asses.

I don't believe in violence, so i'm going to pay and move on with my life.. hopefully it's in tact.

What if all that happens simultaneously while you are sick, in the hospital, and just got a pink slip?

- literally impossible.

maybe the example is a bit extreme.... but a lot of people go under by getting hit with a blow of medical bills plus transmission blows plus need a root canal or something... sometimes bad crap happens without spacing it out properly to let your savings rebuild.

I like 18 mo. 9 months ultra liquid meaning i have it TODAY or tomorrow. 9 mo. invested in income generating low volatity assets like baby bonds (exchange traded debt) or bond ETFs.

- You're ultra conservative. Good for you if it works for you. But I see no reason to have 9 months cash sitting around. Even with your hypothetical situations, it's not 9 months you want, it's enough to cover your contingencies.

I'm already HEAVILY invested in the stock market. I'm pro investment. But at some point you just need money around. Otherwise what are you going to do with it... waste it on good or services you neither need or want?

If you've got under 100K ready and available you're probably going to miss out on an opportunity in life... and that's not worth risking a few interest points on a loan, or invested in some individual stock.

- You're There literally is no situation where I'd need to pull out 100k tomorrow where I wouldn't be willing to take out a loan. And maybe a 1% chance of the situation arising prompting me to take the loan.

Fine, I'll concede that. But it's far better for people to over-save than under-save... and 95% under-save. The ability to save properly or even over-save is a really 1% type of problem.

I'll agree with your last paragraph but you lost me at taking advantage of a friend or family member.

 

[George Jefferson Airplane]

Do HELOC's have annual fees and/or fees if you don't use it? What would be the upside to opening one if you had no real intention of using it besides as an emergency fund? Can't say I know much about them at all.

 

[Dentist]

What are you going to do if you wreck your car and need another one tomorrow?

- insurance would cover the cost for the rental and I can go a while without a car if neccessary.

I'm glad you can get by without a car, but most people need a car ASAP and you certainly don't want to take a loan out for a vehicle because that's stupid.. so you need the full amount. I'll accept buying a used dilapidated car if you must, but you're gonna need at least 10K here.

What if an AMAZING opportunity comes to buy something at pennies on the dollar because of someone else's misfortune and you need 25-30K TOMORROW?

- Be specific here. What exactly might I miss out on?

A friend or family member has to sell their car asap because they need cash immediately due to not following my guidelines.. this is an opportune time to take advantage of someone down on their luck. A quick inspection and analysis says the car is worth 25K easily but for anyone with cash they'll part with it for 17k. You pay the cash, flip the car easily, and profit immensely simply for having cash on hand.

What are you going to do if a massive foundation problem arises and you need 20K to fix it tomorrow?

- Is this how construction companies work? Pretty sure there would be a grace period here.

Anytime i've done any work i needed a pretty good amount up front, then some at the end. Given that the amount of time this project will take is short, you better have your money ready soon.. if not tomorrow.. at least within a few weeks.

What if you child gets kidnapped and you need 50k for ransom?

- go all Liam Neeson on their asses.

I don't believe in violence, so i'm going to pay and move on with my life.. hopefully it's in tact.

What if all that happens simultaneously while you are sick, in the hospital, and just got a pink slip?

- literally impossible.

maybe the example is a bit extreme.... but a lot of people go under by getting hit with a blow of medical bills plus transmission blows plus need a root canal or something... sometimes bad crap happens without spacing it out properly to let your savings rebuild.

I like 18 mo. 9 months ultra liquid meaning i have it TODAY or tomorrow. 9 mo. invested in income generating low volatity assets like baby bonds (exchange traded debt) or bond ETFs.

- You're ultra conservative. Good for you if it works for you. But I see no reason to have 9 months cash sitting around. Even with your hypothetical situations, it's not 9 months you want, it's enough to cover your contingencies.

I'm already HEAVILY invested in the stock market. I'm pro investment. But at some point you just need money around. Otherwise what are you going to do with it... waste it on good or services you neither need or want?

If you've got under 100K ready and available you're probably going to miss out on an opportunity in life... and that's not worth risking a few interest points on a loan, or invested in some individual stock.

- You're There literally is no situation where I'd need to pull out 100k tomorrow where I wouldn't be willing to take out a loan. And maybe a 1% chance of the situation arising prompting me to take the loan.

Fine, I'll concede that. But it's far better for people to over-save than under-save... and 95% under-save. The ability to save properly or even over-save is a really 1% type of problem.

I'll agree with your last paragraph but you lost me at taking advantage of a friend or family member.

Let me rephrase it. They need the cash now. You are doing them a favor. It just turns out it's a fantastic opportunity for you as well.

They are HAPPY to sell this vehicle. They recognize they may be taking the worst of it.. but in this case it's superior to doing payday loans or something.

Taking advantage was a slightly devious term. They were going to sell the car to someone and take a hit.. why not be the person that profits while helping them out?

 

[FUBAR]

Dentist - I realize that point isn't the key here, but I'm much more likely to help them sell it for more than I'd pay.

Then again, maybe I'm just lucky that the vast majority of my friends have good solid jobs and my family isn't in a position of dire need. So it might just be a difference of perspective based on our experiences. If you're keeping money out off the market in anticipation of being in a position to help a friend by giving them thousands less than you can get a short time later, that just isn't something I'm familiar with.

Eta: the only scenario I can see happening is if my landlord decided he wanted to sell quickly and the convenience of us buying would save us both boatloads. I'd probably want to put 20% down, so the $50k could come in handy there. If that happened, I'd have to sell stock. Same for the person who owns the land adjacent to our land in Tennessee, but that land would probably only cost $20k or so.

So I guess I'm coming around to seeing possibilities, but not enough to keep me out odd the stock market right now.

 

[Binky The Doormat]

Dentist - I realize that point isn't the key here, but I'm much more likely to help them sell it for more than I'd pay.

Then again, maybe I'm just lucky that the vast majority of my friends have good solid jobs and my family isn't in a position of dire need. So it might just be a difference of perspective based on our experiences. If you're keeping money out off the market in anticipation of being in a position to help a friend by giving them thousands less than you can get a short time later, that just isn't something I'm familiar with.

I am with Dentist here though plenty of financial advisors will tell us that is too much too keep out of active investments.

I do it because that cash is what we live on and I am more comfortable with some cushion of time for the market to recover before I have to cash in some more of my investments. It certainly isn't foolproof - if the market takes a really big hit, its not likely to recover fully in that period of time, but it does provide some pad and I am less likely to have to sell when the market has just dropped significantly.

 

[ghostguy123]

Having cash on hand for the possibility of an investment seems silly for a couple reasons.

1- For a great investment opportunity, just take out a loan.

2- if you did find this opportunity and then used your emergency fund, that means you don't have an emergency fund anymore because you just used it for a non emergency.

My brother currently has his house paid off, no debt, two fairly new nice cars paid off. He also has over 100 grand sitting in his bank account, and has only been putting in like 6% into his 401 k for a long long time. I didn't realize those last two things were quite that drastic until recently, and have been having a hell of a time trying to explain to him that he is LOSING money in that savings account. He keeps telling me he isn't losing money, he is getting interest. In time......in time.

 

[ghostguy123]

Then again, if you are in a position where all your assets are paid off an you want to keep 100 grand in the bank for whatever reason, well, chances are you will be ok in the long run anyway.

 

[Chadstroma]

Do HELOC's have annual fees and/or fees if you don't use it? What would be the upside to opening one if you had no real intention of using it besides as an emergency fund? Can't say I know much about them at all.

It use to be the industry standard leaned towards no annual fees. Now, the industry has gone to having an annual fee which is waived if you do something- usually have a particular kind of checking account with them or have X amount of money with them or use X amount on the line.

The upside on having one without an intention on using one is about timing and effort. It takes most of my customers about 4-5 weeks to get everything done and ready to close (with of course outliers with less or more time). Once it is done and sign there is a three day right of rescission that you have to wait on to have access. Plus, there is the effort of getting the needed docs. But if you have the line- you just need to access it.

 

[Chadstroma]

To follow up on my last post- for my customers who do not qualify to get the annual fee waived and cost savings from refinancing other debt don't offset it, I just say it is up to you: Is it worth $90 annual fee to pay for the peace of mind of having that financial tool for the next 10 years? If so, then we can get the application going. If not, then let's look at some other options.

 

[George Jefferson Airplane]

To follow up on my last post- for my customers who do not qualify to get the annual fee waived and cost savings from refinancing other debt don't offset it, I just say it is up to you: Is it worth $90 annual fee to pay for the peace of mind of having that financial tool for the next 10 years? If so, then we can get the application going. If not, then let's look at some other options.

Typically how much equity do you have to have to qualify? Any good tools out there you recommend when applying?

 

[Chadstroma]

To follow up on my last post- for my customers who do not qualify to get the annual fee waived and cost savings from refinancing other debt don't offset it, I just say it is up to you: Is it worth $90 annual fee to pay for the peace of mind of having that financial tool for the next 10 years? If so, then we can get the application going. If not, then let's look at some other options.

Typically how much equity do you have to have to qualify? Any good tools out there you recommend when applying?

It depends on the institution really.

To get the best pricing with my company you need a line of $75K and no more than 80% CLTV. We will do a line for as little as $15K and go to 90% of the CLTV (Combined Loan to Value) but the rate jumps up. Right now the promotion is 1.5% for the first five months and then 2.99% after as long as you meet the $75K/80% CLTV marks. If under $75K is jumps it up 50bps and if it is over 80% CLTV it adds another 50bps. Most of our competitors in my area are around 3.99% as their best pricing which through this promotion is my worst pricing.

Not sure what you mean by tools. There are no real 'tips' to applying other than shop around. The things you want to know are:

1. Rate
2. Max CLTV's
3. Closing costs
4. Annual fees
5. Prepayment penalty
6. Accessibility and any fees to various ways of accessing
7. Any other fees (unusual outside of the above but you never know)

 

[Dentist]

Having cash on hand for the possibility of an investment seems silly for a couple reasons.

1- For a great investment opportunity, just take out a loan.

2- if you did find this opportunity and then used your emergency fund, that means you don't have an emergency fund anymore because you just used it for a non emergency.

My brother currently has his house paid off, no debt, two fairly new nice cars paid off. He also has over 100 grand sitting in his bank account, and has only been putting in like 6% into his 401 k for a long long time. I didn't realize those last two things were quite that drastic until recently, and have been having a hell of a time trying to explain to him that he is LOSING money in that savings account. He keeps telling me he isn't losing money, he is getting interest. In time......in time.

1 - sigh.... com'on man

2 - That's why I'm advocating more cash than just an emergency. I'm talking about having an emergency fund and then more cash.

And obviously you should only have this cash after maxing out your 401k, backdoor roth IRA, HSA, spousal IRA if applicable, and after all consumer debt is 100% paid for outside of a mortgage, provided you have a 15 year mortgage at a great rate.

But those should definitely be your goals.

All money should be deferred somewhere if possible so that it isn't spent on frivolous things and so you don't have lifestyle creep as you advance in your career.

 

[ghostguy123]

Having cash on hand for the possibility of an investment seems silly for a couple reasons.

1- For a great investment opportunity, just take out a loan.

2- if you did find this opportunity and then used your emergency fund, that means you don't have an emergency fund anymore because you just used it for a non emergency.

My brother currently has his house paid off, no debt, two fairly new nice cars paid off. He also has over 100 grand sitting in his bank account, and has only been putting in like 6% into his 401 k for a long long time. I didn't realize those last two things were quite that drastic until recently, and have been having a hell of a time trying to explain to him that he is LOSING money in that savings account. He keeps telling me he isn't losing money, he is getting interest. In time......in time.

1 - sigh.... com'on man

2 - That's why I'm advocating more cash than just an emergency. I'm talking about having an emergency fund and then more cash.

And obviously you should only have this cash after maxing out your 401k, backdoor roth IRA, HSA, spousal IRA if applicable, and after all consumer debt is 100% paid for outside of a mortgage, provided you have a 15 year mortgage at a great rate.

But those should definitely be your goals.

All money should be deferred somewhere if possible so that it isn't spent on frivolous things and so you don't have lifestyle creep as you advance in your career.

I think you are then describing what an emergency fund should be for "rich" people. What % of people is it even physically possible for them to do all those things and also have a huge cash fund?

 

[Dentist]

Having cash on hand for the possibility of an investment seems silly for a couple reasons.

1- For a great investment opportunity, just take out a loan.

2- if you did find this opportunity and then used your emergency fund, that means you don't have an emergency fund anymore because you just used it for a non emergency.

My brother currently has his house paid off, no debt, two fairly new nice cars paid off. He also has over 100 grand sitting in his bank account, and has only been putting in like 6% into his 401 k for a long long time. I didn't realize those last two things were quite that drastic until recently, and have been having a hell of a time trying to explain to him that he is LOSING money in that savings account. He keeps telling me he isn't losing money, he is getting interest. In time......in time.

1 - sigh.... com'on man

2 - That's why I'm advocating more cash than just an emergency. I'm talking about having an emergency fund and then more cash.

And obviously you should only have this cash after maxing out your 401k, backdoor roth IRA, HSA, spousal IRA if applicable, and after all consumer debt is 100% paid for outside of a mortgage, provided you have a 15 year mortgage at a great rate.

But those should definitely be your goals.

All money should be deferred somewhere if possible so that it isn't spent on frivolous things and so you don't have lifestyle creep as you advance in your career.

I think you are then describing what an emergency fund should be for "rich" people. What % of people is it even physically possible for them to do all those things and also have a huge cash fund?

I thought this was FBG's. Did I accidentally log into fftoday?

 

[ghostguy123]

Try logging into reality

 

[wilked]

I have a heloc at 2.5% interest rate. That is my emergency fund (along with credit cards). I also put 500 a month in Vanguard Life Strategy Conservative Growth Fund.(vscgx).

Here's one reason why this is a bad idea.

One type of emergency - losing your job

One typical reason that banks close HELOCs - losing your job

Put them together - bad strategy

I have not heard of banks proactively searching/requesting income information while the credit line is open. This happens? It would happen for a request to renew a line, of course. I also know it can happen if a borrower's credit deteriorates or collateral depreciates. But if a borrower's credit stays good and CLTV stays fine?

well, there are a few more steps (lose job, miss a bill or two), HELOC is closed. Basically the two events can begin be ignited by the same spark. It's not overnight, but you don't build an e-fund overnight either.

 

[Tiger Fan]

Having cash on hand for the possibility of an investment seems silly for a couple reasons.

1- For a great investment opportunity, just take out a loan.

2- if you did find this opportunity and then used your emergency fund, that means you don't have an emergency fund anymore because you just used it for a non emergency.

My brother currently has his house paid off, no debt, two fairly new nice cars paid off. He also has over 100 grand sitting in his bank account, and has only been putting in like 6% into his 401 k for a long long time. I didn't realize those last two things were quite that drastic until recently, and have been having a hell of a time trying to explain to him that he is LOSING money in that savings account. He keeps telling me he isn't losing money, he is getting interest. In time......in time.

1 - sigh.... com'on man

2 - That's why I'm advocating more cash than just an emergency. I'm talking about having an emergency fund and then more cash.

And obviously you should only have this cash after maxing out your 401k, backdoor roth IRA, HSA, spousal IRA if applicable, and after all consumer debt is 100% paid for outside of a mortgage, provided you have a 15 year mortgage at a great rate.

But those should definitely be your goals.

All money should be deferred somewhere if possible so that it isn't spent on frivolous things and so you don't have lifestyle creep as you advance in your career.

Is there a max on the backdoor roth?

 

[NutterButter]

Having cash on hand for the possibility of an investment seems silly for a couple reasons.

1- For a great investment opportunity, just take out a loan.

2- if you did find this opportunity and then used your emergency fund, that means you don't have an emergency fund anymore because you just used it for a non emergency.

My brother currently has his house paid off, no debt, two fairly new nice cars paid off. He also has over 100 grand sitting in his bank account, and has only been putting in like 6% into his 401 k for a long long time. I didn't realize those last two things were quite that drastic until recently, and have been having a hell of a time trying to explain to him that he is LOSING money in that savings account. He keeps telling me he isn't losing money, he is getting interest. In time......in time.

1 - sigh.... com'on man

2 - That's why I'm advocating more cash than just an emergency. I'm talking about having an emergency fund and then more cash.

And obviously you should only have this cash after maxing out your 401k, backdoor roth IRA, HSA, spousal IRA if applicable, and after all consumer debt is 100% paid for outside of a mortgage, provided you have a 15 year mortgage at a great rate.

But those should definitely be your goals.

All money should be deferred somewhere if possible so that it isn't spent on frivolous things and so you don't have lifestyle creep as you advance in your career.

Is there a max on the backdoor roth?

No.

 

[Tiger Fan]

Having cash on hand for the possibility of an investment seems silly for a couple reasons.

1- For a great investment opportunity, just take out a loan.

2- if you did find this opportunity and then used your emergency fund, that means you don't have an emergency fund anymore because you just used it for a non emergency.

My brother currently has his house paid off, no debt, two fairly new nice cars paid off. He also has over 100 grand sitting in his bank account, and has only been putting in like 6% into his 401 k for a long long time. I didn't realize those last two things were quite that drastic until recently, and have been having a hell of a time trying to explain to him that he is LOSING money in that savings account. He keeps telling me he isn't losing money, he is getting interest. In time......in time.

1 - sigh.... com'on man

2 - That's why I'm advocating more cash than just an emergency. I'm talking about having an emergency fund and then more cash.

And obviously you should only have this cash after maxing out your 401k, backdoor roth IRA, HSA, spousal IRA if applicable, and after all consumer debt is 100% paid for outside of a mortgage, provided you have a 15 year mortgage at a great rate.

But those should definitely be your goals.

All money should be deferred somewhere if possible so that it isn't spent on frivolous things and so you don't have lifestyle creep as you advance in your career.

Is there a max on the backdoor roth?

No.

Did a little more reading...wouldn't it be $5500/year/person b/c that's what the traditional IRA contribution limits are?

 

[NutterButter]

Having cash on hand for the possibility of an investment seems silly for a couple reasons.

1- For a great investment opportunity, just take out a loan.

2- if you did find this opportunity and then used your emergency fund, that means you don't have an emergency fund anymore because you just used it for a non emergency.

My brother currently has his house paid off, no debt, two fairly new nice cars paid off. He also has over 100 grand sitting in his bank account, and has only been putting in like 6% into his 401 k for a long long time. I didn't realize those last two things were quite that drastic until recently, and have been having a hell of a time trying to explain to him that he is LOSING money in that savings account. He keeps telling me he isn't losing money, he is getting interest. In time......in time.

1 - sigh.... com'on man

2 - That's why I'm advocating more cash than just an emergency. I'm talking about having an emergency fund and then more cash.

And obviously you should only have this cash after maxing out your 401k, backdoor roth IRA, HSA, spousal IRA if applicable, and after all consumer debt is 100% paid for outside of a mortgage, provided you have a 15 year mortgage at a great rate.

But those should definitely be your goals.

All money should be deferred somewhere if possible so that it isn't spent on frivolous things and so you don't have lifestyle creep as you advance in your career.

Is there a max on the backdoor roth?

No.

Did a little more reading...wouldn't it be $5500/year/person b/c that's what the traditional IRA contribution limits are?

THat's the amount you can contribute to your traditional or roth directly if you were below the income limit. That's not how much you can convert in a year. Two different things. So if you had 40k in a traditional, you can convert that all in one year if you wanted. Obviously tax implications if you were converting some deductible traditional.

 

[Andrew74]

Having cash on hand for the possibility of an investment seems silly for a couple reasons.

1- For a great investment opportunity, just take out a loan.

2- if you did find this opportunity and then used your emergency fund, that means you don't have an emergency fund anymore because you just used it for a non emergency.

My brother currently has his house paid off, no debt, two fairly new nice cars paid off. He also has over 100 grand sitting in his bank account, and has only been putting in like 6% into his 401 k for a long long time. I didn't realize those last two things were quite that drastic until recently, and have been having a hell of a time trying to explain to him that he is LOSING money in that savings account. He keeps telling me he isn't losing money, he is getting interest. In time......in time.

1 - sigh.... com'on man

2 - That's why I'm advocating more cash than just an emergency. I'm talking about having an emergency fund and then more cash.

And obviously you should only have this cash after maxing out your 401k, backdoor roth IRA, HSA, spousal IRA if applicable, and after all consumer debt is 100% paid for outside of a mortgage, provided you have a 15 year mortgage at a great rate.

But those should definitely be your goals.

All money should be deferred somewhere if possible so that it isn't spent on frivolous things and so you don't have lifestyle creep as you advance in your career.

Is there a max on the backdoor roth?

No.

Did a little more reading...wouldn't it be $5500/year/person b/c that's what the traditional IRA contribution limits are?

THat's the amount you can contribute to your traditional or roth directly if you were below the income limit. That's not how much you can convert in a year. Two different things. So if you had 40k in a traditional, you can convert that all in one year if you wanted. Obviously tax implications if you were converting some deductible traditional.

That's a Roth conversion...the backdoor Roth is when you make an annual nondeductible contribution to a traditional IRA ($5,500 or $6,500 with catch up) because you are over the MAGI limits and then move it to a Roth. There are no tax issues here.

 

[NutterButter]

Having cash on hand for the possibility of an investment seems silly for a couple reasons.

1- For a great investment opportunity, just take out a loan.

2- if you did find this opportunity and then used your emergency fund, that means you don't have an emergency fund anymore because you just used it for a non emergency.

My brother currently has his house paid off, no debt, two fairly new nice cars paid off. He also has over 100 grand sitting in his bank account, and has only been putting in like 6% into his 401 k for a long long time. I didn't realize those last two things were quite that drastic until recently, and have been having a hell of a time trying to explain to him that he is LOSING money in that savings account. He keeps telling me he isn't losing money, he is getting interest. In time......in time.

1 - sigh.... com'on man

2 - That's why I'm advocating more cash than just an emergency. I'm talking about having an emergency fund and then more cash.

And obviously you should only have this cash after maxing out your 401k, backdoor roth IRA, HSA, spousal IRA if applicable, and after all consumer debt is 100% paid for outside of a mortgage, provided you have a 15 year mortgage at a great rate.

But those should definitely be your goals.

All money should be deferred somewhere if possible so that it isn't spent on frivolous things and so you don't have lifestyle creep as you advance in your career.

Is there a max on the backdoor roth?

No.

Did a little more reading...wouldn't it be $5500/year/person b/c that's what the traditional IRA contribution limits are?

THat's the amount you can contribute to your traditional or roth directly if you were below the income limit. That's not how much you can convert in a year. Two different things. So if you had 40k in a traditional, you can convert that all in one year if you wanted. Obviously tax implications if you were converting some deductible traditional.

That's a Roth conversion...the backdoor Roth is when you make an annual nondeductible contribution to a traditional IRA ($5,500 or $6,500 with catch up) because you are over the MAGI limits and then move it to a Roth. There are no tax issues here.

Its still a conversion either way regardless of how the money got into your traditional IRA in the first play. And yes there are tax issues if part of your traditional IRA includes deductible contributions. You need to be careful about that. If you have a traditional that contains 5k in deductible (say from a rollover) and 5k in non deductible you can't just move the non-deductible amount to the roth. If you tried to move 5k to the roth, the irs actually considers this as 2.5k coming from the deductible and 2.5k coming from the non deductible. The amount that irs considers coming from each is based on what percentage of the total amount in the ira each makes up.