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6 minutes ago, xulf said:

Well, today we paid off the last 22 years of our mortgage.  We sold/closed our investment property last week that we bought in 2013.  We did well on it and rolled that money up with some savings and paid off the house.

We had a 3.7% loan and thought about refinancing, but there was no way we were going to go full term on a 15 or 30 year, so it didn't make sense.

Since the future is unknown I don't know if in the long run this was the best choice versus other usages of the funds, but we now are 100% debt free at 39 years old.  Feeling pretty good about that.

 

Congrats.  Not the direction I would have gone, but very impressive on your part to pull that off.

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Well, today we paid off the last 22 years of our mortgage.  We sold/closed our investment property last week that we bought in 2013.  We did well on it and rolled that money up with some savings and p

My big win was in getting educated on personal finance, getting organized, and making a plan. Details: 1. Learned the value of an HSA and contributed for 2019 and 2020. 2. Got my wife’s

Get fired

2 hours ago, xulf said:

Well, today we paid off the last 22 years of our mortgage.  We sold/closed our investment property last week that we bought in 2013.  We did well on it and rolled that money up with some savings and paid off the house.

We had a 3.7% loan and thought about refinancing, but there was no way we were going to go full term on a 15 or 30 year, so it didn't make sense.

Since the future is unknown I don't know if in the long run this was the best choice versus other usages of the funds, but we now are 100% debt free at 39 years old.  Feeling pretty good about that.

Did the same thing.  Don't regret it.  My liabilities are whatever my CC bills are at the moment.

Of course, as soon as I did that a hurricane decided to slap around my other place.  Sandblasted the paint off of one side it was so fierce.  Bah humbug.

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2 hours ago, xulf said:

Well, today we paid off the last 22 years of our mortgage.  We sold/closed our investment property last week that we bought in 2013.  We did well on it and rolled that money up with some savings and paid off the house.

We had a 3.7% loan and thought about refinancing, but there was no way we were going to go full term on a 15 or 30 year, so it didn't make sense.

Since the future is unknown I don't know if in the long run this was the best choice versus other usages of the funds, but we now are 100% debt free at 39 years old.  Feeling pretty good about that.

 

Awesome.  Been in that boat for about 7 years now and it's great.  Just opens up so much.  And given all the employment uncertainties with COVID, just knowing that you don't have what most people's largest expense is.....that's a huge "peace of mind" aspect.

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9 hours ago, xulf said:

 I don't know if in the long run this was the best choice versus other usages of the funds, but we now are 100% debt free at 39 years old.  Feeling pretty good about that.

 

If it gives you peace of mind, it's the right move. Congrats!

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I wasn't sure where to post this question but this seems like the right spot for it (real estate related).

My wife and I live in a very high cost of living area. We've lived here for almost two years and currenty rent after owning a home in our previous location (reasonable cost of living area). In terms of property we also currently own a rental property, 3-unit building that is doing well and is cash flow positive.

Most of my adult life I have been against renting, that is until I moved to our current location. Where we live it is extremely tenant friendly (ex. we're on a "lease" but can leave at any time with 1-month notice, rent is tied to inflation, etc.) and while this is nice I do miss having a yard, BBQs, or even a balcony. To purchase an apartment our city is approximately $1,200/sqft and a house in the suburbs we would want to live in is approximately $750-850/sqft. Places do retain their value very well (I know we've all heard this one before...). Also to purchase a place requires a large amount of upfront fees (~8%) and the breakeven to renting would be about 5-6 years we figure. It's possible that we could purchase a place next year but it would really wipe out a lot of our savings and life certainly wouldn't be as comfortable. Also we need to move next year as baby #1 is on the way and we live in a 550sqft, 1-bedroom apartment. So would be moving to a house for the long haul or......

Lately I have been warming to the idea of renting longer term as we live in such a high cost of living area. Moving to rent to a slightly more expensive 2-bedroom apartment and using some our savings to purchase a vacation apartment. The vacation apartment would be in an area with lower upfront fees and cost less $ per sqft. More importantly we could purchase the vacation apartment, fill it with some toys (bikes, paddleboard, furniture, etc) and still have savings. Would be in a place that we like and is easily accessible and a place for our money to go while allowing us easy future vacations with our family and friends. Or just a long weekend. After looking at the amortization table for the amount of mortgage that we'd want, the monthly interest portion of the mortgage would be around $400-500 (very low interest rates). 

Is it crazy to consider continuing to rent while purchasing a place that is not a primary residence? I can't imagine this making sense if we were living in a low or medium cost of living area but in a high cost of living area I can understand it. I suppose it also depends on how much we think the vacation spot would appreciate over time. Could find a company to manage it to rent out every so often on AirBnB too, although not my first choice.

What do you think? Feel free to call me insane. TIA.

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I think the two decisions are independent and there is no reason to think of them together

 

Decision 1 - Rent vs buy for primary.  5-7 years is a typical break even, so you need to know that you'll be there for that duration.  Some people like to fix things themselves, others like to call the Super/landlord.  I am a believer in having 20% downpayment, so that can be a barrier.  Some are young and are better served to be mobile for their career or life and not be tied to a house.  And so on.  

 

Decision 2 - Rent vs buy for vacation home.  Again, I would want to know that I am going to be in that area 5-7 years at least.  I'd compare the annual cost of renting vs annual cost of owning.  If you plan to be a landlord (rent the place in your absence) that's a decision.  Understand what it takes for upkeep (vacatoin is not a vacation if you're patching and painting the whole time).  There's pros and cons both ways

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31 minutes ago, Harris said:

I wasn't sure where to post this question but this seems like the right spot for it (real estate related).

My wife and I live in a very high cost of living area. We've lived here for almost two years and currenty rent after owning a home in our previous location (reasonable cost of living area). In terms of property we also currently own a rental property, 3-unit building that is doing well and is cash flow positive.

Most of my adult life I have been against renting, that is until I moved to our current location. Where we live it is extremely tenant friendly (ex. we're on a "lease" but can leave at any time with 1-month notice, rent is tied to inflation, etc.) and while this is nice I do miss having a yard, BBQs, or even a balcony. To purchase an apartment our city is approximately $1,200/sqft and a house in the suburbs we would want to live in is approximately $750-850/sqft. Places do retain their value very well (I know we've all heard this one before...). Also to purchase a place requires a large amount of upfront fees (~8%) and the breakeven to renting would be about 5-6 years we figure. It's possible that we could purchase a place next year but it would really wipe out a lot of our savings and life certainly wouldn't be as comfortable. Also we need to move next year as baby #1 is on the way and we live in a 550sqft, 1-bedroom apartment. So would be moving to a house for the long haul or......

Lately I have been warming to the idea of renting longer term as we live in such a high cost of living area. Moving to rent to a slightly more expensive 2-bedroom apartment and using some our savings to purchase a vacation apartment. The vacation apartment would be in an area with lower upfront fees and cost less $ per sqft. More importantly we could purchase the vacation apartment, fill it with some toys (bikes, paddleboard, furniture, etc) and still have savings. Would be in a place that we like and is easily accessible and a place for our money to go while allowing us easy future vacations with our family and friends. Or just a long weekend. After looking at the amortization table for the amount of mortgage that we'd want, the monthly interest portion of the mortgage would be around $400-500 (very low interest rates). 

Is it crazy to consider continuing to rent while purchasing a place that is not a primary residence? I can't imagine this making sense if we were living in a low or medium cost of living area but in a high cost of living area I can understand it. I suppose it also depends on how much we think the vacation spot would appreciate over time. Could find a company to manage it to rent out every so often on AirBnB too, although not my first choice.

What do you think? Feel free to call me insane. TIA.

This thread might help you.  https://forums.footballguys.com/forum/topic/787050-buying-a-vacation-home-as-an-investment-property/?tab=comments#comment-22884692  There's a lot in there from a very helpful poster.  The caveat being that maybe French people are respectful of property.

How would you fill that second home with things that wouldn't walk off or get destroyed?  Also in addition to mayonnaise and vinegar on your bedding, not you have COVID in your place.

The expectation in metro areas here is that home prices will fall as the WFH people scatter from the huge metro areas.  Obviously you are going to have a much better handle on what COVID did to your local economy.  If COVID is with us for another year that $750 to $850 a square foot may drop.  From details presented, I would rent another year and see how the landscape changes.

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6 minutes ago, FishNSuds said:

This thread might help you.  https://forums.footballguys.com/forum/topic/787050-buying-a-vacation-home-as-an-investment-property/?tab=comments#comment-22884692  There's a lot in there from a very helpful poster.  The caveat being that maybe French people are respectful of property.

How would you fill that second home with things that wouldn't walk off or get destroyed?  Also in addition to mayonnaise and vinegar on your bedding, not you have COVID in your place.

The expectation in metro areas here is that home prices will fall as the WFH people scatter from the huge metro areas.  Obviously you are going to have a much better handle on what COVID did to your local economy.  If COVID is with us for another year that $750 to $850 a square foot may drop.  From details presented, I would rent another year and see how the landscape changes.

Would likely not want to rent it out for the reasons you mentioned and would make it a spot we could easily get to and immediately unwind for the weekend or work remotely from for an small extended period. Perhaps one day 8 years from now I could turn it into a permanent rental but would not rent it immediately. And definitely would be a vacation condo/apartment vs. home. Do not want to worry about yard work or the large amount of work that comes with a house as compared to condo.

 

It's certainly interesting regarding the home prices falling in the US in large metro areas. Here in Paris the home prices in the city proper are likely to stay stable as the population density is outrageous. I have heard of a large amount of interest in people looking at places in the suburbs here as they want to have a yard and outdoor space to be able to work remotely from if work from home becomes more permanent. In the city proper here there is not much green space at all besides dedicated parks. And no one has houses, only apartments within the city limits. Leaving the metro area here is much more difficult as so many of the jobs in the country are concentrated in one city unlike in the US.

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10 minutes ago, Harris said:

Would likely not want to rent it out for the reasons you mentioned and would make it a spot we could easily get to and immediately unwind for the weekend or work remotely from for an small extended period. Perhaps one day 8 years from now I could turn it into a permanent rental but would not rent it immediately. And definitely would be a vacation condo/apartment vs. home. Do not want to worry about yard work or the large amount of work that comes with a house as compared to condo.

 

It's certainly interesting regarding the home prices falling in the US in large metro areas. Here in Paris the home prices in the city proper are likely to stay stable as the population density is outrageous. I have heard of a large amount of interest in people looking at places in the suburbs here as they want to have a yard and outdoor space to be able to work remotely from if work from home becomes more permanent. In the city proper here there is not much green space at all besides dedicated parks. And no one has houses, only apartments within the city limits. Leaving the metro area here is much more difficult as so many of the jobs in the country are concentrated in one city unlike in the US.

I kind of like your idea of buying a second place you want to hang and enjoy if the housing landscape there forces you live in a place that isn't optimal.  A lot of people in the US working in the mega metros rented a small place for the week and then departed for their "home" on the weekends.

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28 minutes ago, wilked said:

I think the two decisions are independent and there is no reason to think of them together

 

Decision 1 - Rent vs buy for primary.  5-7 years is a typical break even, so you need to know that you'll be there for that duration.  Some people like to fix things themselves, others like to call the Super/landlord.  I am a believer in having 20% downpayment, so that can be a barrier.  Some are young and are better served to be mobile for their career or life and not be tied to a house.  And so on.  

 

Decision 2 - Rent vs buy for vacation home.  Again, I would want to know that I am going to be in that area 5-7 years at least.  I'd compare the annual cost of renting vs annual cost of owning.  If you plan to be a landlord (rent the place in your absence) that's a decision.  Understand what it takes for upkeep (vacatoin is not a vacation if you're patching and painting the whole time).  There's pros and cons both ways

:goodposting:

Buy VS. Rent is a real thing, particularly in HCOL spots.  There are good calculators out there.

On the second one, I'm a big believer in "but utility, rent luxury". 

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1 hour ago, Harris said:

 

Is it crazy to consider continuing to rent while purchasing a place that is not a primary residence? I can't imagine this making sense if we were living in a low or medium cost of living area but in a high cost of living area I can understand it. I suppose it also depends on how much we think the vacation spot would appreciate over time. Could find a company to manage it to rent out every so often on AirBnB too, although not my first choice.

What do you think? Feel free to call me insane. TIA.

I couldn't imagine paying $750 or more per square feet. We're just under $100/sq ft. Maybe for like a 2nd row beach house I can see it, but wow. 

If you plan to visit the 2nd home fairly often I wouldn't bother renting it out. We've considered the same idea but it doesn't seem worth it to rent out and risk damaging the house. 

1 hour ago, wilked said:

I think the two decisions are independent and there is no reason to think of them together

 

Decision 1 - Rent vs buy for primary.  5-7 years is a typical break even, so you need to know that you'll be there for that duration.  Some people like to fix things themselves, others like to call the Super/landlord.  I am a believer in having 20% downpayment, so that can be a barrier.  Some are young and are better served to be mobile for their career or life and not be tied to a house.  And so on.  

 

Decision 2 - Rent vs buy for vacation home.  Again, I would want to know that I am going to be in that area 5-7 years at least.  I'd compare the annual cost of renting vs annual cost of owning.  If you plan to be a landlord (rent the place in your absence) that's a decision.  Understand what it takes for upkeep (vacatoin is not a vacation if you're patching and painting the whole time).  There's pros and cons both ways

:goodposting:

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18 minutes ago, -OZ- said:

I couldn't imagine paying $750 or more per square feet. We're just under $100/sq ft. Maybe for like a 2nd row beach house I can see it, but wow. 

Same, it's quite hard to stomach for a house but interest rates here are around 1% on a 25-year term. Once you get over the initial hump of the high fees/taxes on the initial purchase, it's nearly all equity you're plowing into it. And most, but not all, houses are generally quite small here....at least for the price we're looking at.

 

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42 minutes ago, -OZ- said:

I couldn't imagine paying $750 or more per square feet. We're just under $100/sq ft. Maybe for like a 2nd row beach house I can see it, but wow. 

First row beach house here is about $500/sq.ft. or less.

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12 minutes ago, Sand said:

First row beach house here is about $500/sq.ft. or less.

Gulf shores? We've considered it. 

We're headed to Hilton Head in a week. The house we're renting according to zillow is $450 /sq ft, third row. The first row homes we'll walk between both cost just over $3 million. Oddly, one is just over 3,000', the other is 6,700'. With only $300k difference in price. 

🤔 The house next door to where we're staying is actually for sale, if anyone has an extra $1.2 million laying around, looks like a nice place. 

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1 hour ago, -OZ- said:

Gulf shores? We've considered it. 

We're headed to Hilton Head in a week. The house we're renting according to zillow is $450 /sq ft, third row. The first row homes we'll walk between both cost just over $3 million. Oddly, one is just over 3,000', the other is 6,700'. With only $300k difference in price. 

🤔 The house next door to where we're staying is actually for sale, if anyone has an extra $1.2 million laying around, looks like a nice place. 

At least down in Ft. Morgan the land of my place is worth twice the structure.  This pricing makes sense.

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2 hours ago, -OZ- said:

Gulf shores? We've considered it. 

We're headed to Hilton Head in a week. The house we're renting according to zillow is $450 /sq ft, third row. The first row homes we'll walk between both cost just over $3 million. Oddly, one is just over 3,000', the other is 6,700'. With only $300k difference in price. 

🤔 The house next door to where we're staying is actually for sale, if anyone has an extra $1.2 million laying around, looks like a nice place. 

Be right back....going to short OTC Biotech stonks....

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1 hour ago, Sand said:

At least down in Ft. Morgan the land of my place is worth twice the structure.  This pricing makes sense.

Good point. The extra 3,000' might only be worth $100 per foot. I'm not sure about Zillow, would damage or upgrades be included on the site if the house isn't for sale?

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46 minutes ago, ConstruxBoy said:

Be right back....going to short OTC Biotech stonks....

I'll be happy to check it out for you. 

Hell, I'd be happy to go halfsies, or part of a group there. 

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On 9/22/2020 at 6:51 PM, xulf said:

Well, today we paid off the last 22 years of our mortgage.  We sold/closed our investment property last week that we bought in 2013.  We did well on it and rolled that money up with some savings and paid off the house.

We had a 3.7% loan and thought about refinancing, but there was no way we were going to go full term on a 15 or 30 year, so it didn't make sense.

Since the future is unknown I don't know if in the long run this was the best choice versus other usages of the funds, but we now are 100% debt free at 39 years old.  Feeling pretty good about that.

 

I would have advised differently but I am sure that is a huge emotional payoff. Congrats!

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11 hours ago, -OZ- said:

Good point. The extra 3,000' might only be worth $100 per foot. I'm not sure about Zillow, would damage or upgrades be included on the site if the house isn't for sale?

Zillow is for poo and the answer is no. 

ETA: Unless the owner input this into Zillow.... even then... still for poo. 

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  • 4 weeks later...

Interested in getting some other takes on this and to see if others have seen this at their employers. My company got a new CEO and the dude is slashing everything, expecting 20% headcount reduction, lots of other changes. Today we received an email that our company matching contributions to our 401K next year will change to an annual contribution. Currently they match dollar for dollar up to 6%, that part stays the same. What will change is matching contributions will not be paid into a person's account until the last Bus Day of the year and you must be employed as of 12/15 to receive them.

So this company is going down the tubes and I am trying to get my ducks in a row to start actively looking for another position. I think it unlikely that I will be around for all of next year either through possible layoff or by finding another job. Seems like a no brainer to turn off 401K contributions starting January 1st and to put that money in either a Roth (if I qualify due to FBG money) or some other investment vehicle. Wondering if I am thinking about this incorrectly or missing anything?

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18 minutes ago, Buckna said:

Interested in getting some other takes on this and to see if others have seen this at their employers. My company got a new CEO and the dude is slashing everything, expecting 20% headcount reduction, lots of other changes. Today we received an email that our company matching contributions to our 401K next year will change to an annual contribution. Currently they match dollar for dollar up to 6%, that part stays the same. What will change is matching contributions will not be paid into a person's account until the last Bus Day of the year and you must be employed as of 12/15 to receive them.

So this company is going down the tubes and I am trying to get my ducks in a row to start actively looking for another position. I think it unlikely that I will be around for all of next year either through possible layoff or by finding another job. Seems like a no brainer to turn off 401K contributions starting January 1st and to put that money in either a Roth (if I qualify due to FBG money) or some other investment vehicle. Wondering if I am thinking about this incorrectly or missing anything?

:unsure: Do we work at the same place?

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48 minutes ago, Buckna said:

Interested in getting some other takes on this and to see if others have seen this at their employers. My company got a new CEO and the dude is slashing everything, expecting 20% headcount reduction, lots of other changes. Today we received an email that our company matching contributions to our 401K next year will change to an annual contribution. Currently they match dollar for dollar up to 6%, that part stays the same. What will change is matching contributions will not be paid into a person's account until the last Bus Day of the year and you must be employed as of 12/15 to receive them.

So this company is going down the tubes and I am trying to get my ducks in a row to start actively looking for another position. I think it unlikely that I will be around for all of next year either through possible layoff or by finding another job. Seems like a no brainer to turn off 401K contributions starting January 1st and to put that money in either a Roth (if I qualify due to FBG money) or some other investment vehicle. Wondering if I am thinking about this incorrectly or missing anything?

Do you already max your Roth IRA? If not, probably makes sense to do that first and then any excess you feel comfortable into your 401K (even if no match it’s still a good investment vehicle). 

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34 minutes ago, bcnfinance said:

Do you already max your Roth IRA? If not, probably makes sense to do that first and then any excess you feel comfortable into your 401K (even if no match it’s still a good investment vehicle). 

Roth vs. 401k probably should be more of a tax situation. I max out 401ks because my tax bracket with my wife working as well. That 401k is money that would have been taxed at our highest bracket and can impact other things like capital gains. If you are in a high tax bracket then maxing 401k is a good move even without a match (that change sucks). If you aren’t then that match change would make me think differently. Also, Roth may not even be an option for FBG’s salaries.

Also, we need to see what happens in the election as Biden wants to change 401k tax deductions to some sort of credit. I’m sure I’ll get screwed somehow.

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1 hour ago, bcnfinance said:

Do you already max your Roth IRA? If not, probably makes sense to do that first and then any excess you feel comfortable into your 401K (even if no match it’s still a good investment vehicle). 

Thanks, this is kind of along the lines I was thinking as we don't currently max our Roth's and are not quite up to the phase out limit for married filing jointly (although getting close.)

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  • 1 month later...
On 10/21/2020 at 8:48 PM, stbugs said:

Roth vs. 401k probably should be more of a tax situation. I max out 401ks because my tax bracket with my wife working as well. That 401k is money that would have been taxed at our highest bracket and can impact other things like capital gains. If you are in a high tax bracket then maxing 401k is a good move even without a match (that change sucks). If you aren’t then that match change would make me think differently. Also, Roth may not even be an option for FBG’s salaries.

Also, we need to see what happens in the election as Biden wants to change 401k tax deductions to some sort of credit. I’m sure I’ll get screwed somehow.

1. You can always backdoor it (unless for some reason you have a traditional IRA which complicates things)

2. If you aren't at the phaseout, it is almost always a better choice to get money into your Roth IRA - after making sure you maximize any 401(k) company match, that is. 

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25 minutes ago, Instinctive said:

1. You can always backdoor it (unless for some reason you have a traditional IRA which complicates things)

2. If you aren't at the phaseout, it is almost always a better choice to get money into your Roth IRA - after making sure you maximize any 401(k) company match, that is. 

For 2, I’m not eligible for it anyway with my wife, but I’d still stick with 401k max because I think my tax levels when retired will be less. Only your top tax bracket would matter as every dollar you take off the tax table is at that highest rate. For people earlier in their career or having a lower top bracket, it makes a lot of sense. Also, I don’t think I’ve ever seen a study on it, but I wonder if having all the taxable dollars working for you during a bull run like we’ve had changes the discussion. You still get taxed on withdrawal but could you end up with enough that you never withdraw it all and it keeps compounding until your kids get it? I think there are new tax laws about having them have to drain those accounts and not just let them keep rolling.

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1 hour ago, stbugs said:

For 2, I’m not eligible for it anyway with my wife, but I’d still stick with 401k max because I think my tax levels when retired will be less. Only your top tax bracket would matter as every dollar you take off the tax table is at that highest rate. For people earlier in their career or having a lower top bracket, it makes a lot of sense. Also, I don’t think I’ve ever seen a study on it, but I wonder if having all the taxable dollars working for you during a bull run like we’ve had changes the discussion. You still get taxed on withdrawal but could you end up with enough that you never withdraw it all and it keeps compounding until your kids get it? I think there are new tax laws about having them have to drain those accounts and not just let them keep rolling.

There's more to it than "will my rate be higher or lower in retirement?"

 

There's the ability to pull Roth funds without it affecting that rate, and the argument in favor of diversified sources to pull from in retirement. AND, if you can afford it now, saving post-tax dollars means you are functionally saving more dollars in a tax advantaged space, which is the biggest thing people overlook. Savings in a Roth account are literally more dollars in retirement than savings in traditional accounts. 

 

I don't like timing the market but the last insight is interesting at least. 

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13 minutes ago, Instinctive said:

There's more to it than "will my rate be higher or lower in retirement?"

 

There's the ability to pull Roth funds without it affecting that rate, and the argument in favor of diversified sources to pull from in retirement. AND, if you can afford it now, saving post-tax dollars means you are functionally saving more dollars in a tax advantaged space, which is the biggest thing people overlook. Savings in a Roth account are literally more dollars in retirement than savings in traditional accounts. 

 

I don't like timing the market but the last insight is interesting at least. 

If your tax rates are identical, they are exactly the same assuming you withdraw every dollar. People mention that you save more, but that is an apples to oranges comparison as it means that you used extra money to pay taxes so that you invested the same amount . You also need to use an example where that extra money you put in the Roth is put into a brokerage account because that money can grow and will be taxed at capital gains rates which historically is less than income taxes and unless Biden passes a change, can be passed to children with a step up basis. It doesn’t matter to me as I can’t take advantage of it right now but just saying that someone spends $15k to net $10k in Roth and compare it to $10k in 401k/Traditional. There’s $5k missing that could go into stocks and either never get taxed (inherited) or get capital gains treatment. 

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13 hours ago, stbugs said:

If your tax rates are identical, they are exactly the same assuming you withdraw every dollar. People mention that you save more, but that is an apples to oranges comparison as it means that you used extra money to pay taxes so that you invested the same amount . You also need to use an example where that extra money you put in the Roth is put into a brokerage account because that money can grow and will be taxed at capital gains rates which historically is less than income taxes and unless Biden passes a change, can be passed to children with a step up basis. It doesn’t matter to me as I can’t take advantage of it right now but just saying that someone spends $15k to net $10k in Roth and compare it to $10k in 401k/Traditional. There’s $5k missing that could go into stocks and either never get taxed (inherited) or get capital gains treatment. 

Yeah I mean if your goal is to build an inheritance fund your function changes significantly. That is not my goal and I haven't looked at that as a goal at all. Would defer to you there.

 

I'm not comparing apples to oranges. I'm simply stating that if you can afford the taxes now, you are getting more pre-tax dollars into tax advantaged space. And I have made such an example (I'll dig it up if I can), and because you're growth is getting taxed along the way (dividends) in your traditional, your drag there does still put you behind on the same amount of cash (of course you can always play with the assumptions to change that).  For me, as I have plenty of income + savings now, I highly value the creation of tax free income for retirement (especially since I'm on target to retire around age 35) as well as the ability to pull principle if I need to. Given that so much is unknown about the future, and we are currently at the lowest marginal tax rates in the history of the nation, chances are, IMO, taxes will actually be higher even with lower income in a decade plus. So even if we go with the basic "tax rates higher now or later", I think there's a strong argument they'll be higher later for anyone with meaningful income/wealth.

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2 hours ago, Instinctive said:

Yeah I mean if your goal is to build an inheritance fund your function changes significantly. That is not my goal and I haven't looked at that as a goal at all. Would defer to you there.

 

I'm not comparing apples to oranges. I'm simply stating that if you can afford the taxes now, you are getting more pre-tax dollars into tax advantaged space. And I have made such an example (I'll dig it up if I can), and because you're growth is getting taxed along the way (dividends) in your traditional, your drag there does still put you behind on the same amount of cash (of course you can always play with the assumptions to change that).  For me, as I have plenty of income + savings now, I highly value the creation of tax free income for retirement (especially since I'm on target to retire around age 35) as well as the ability to pull principle if I need to. Given that so much is unknown about the future, and we are currently at the lowest marginal tax rates in the history of the nation, chances are, IMO, taxes will actually be higher even with lower income in a decade plus. So even if we go with the basic "tax rates higher now or later", I think there's a strong argument they'll be higher later for anyone with meaningful income/wealth.

I feel like we had this discussion several months back, or at least stbugs and I did. I agree with you. His point about the same amount of money does make sense. However the diversity of having already taxed monies and the possibility that rates do go up makes it wise to have a portion in Roths. I'd say 20-30%. 

Also, I believe the latest tax laws did away with the stretch IRAs. So now your kids need to take the money out within 10 years. In the past, they could keep the accounts forever without paying any tax and just pass on the account to their kids. 

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On 10/21/2020 at 9:07 PM, bcnfinance said:
On 10/21/2020 at 8:17 PM, Buckna said:

Interested in getting some other takes on this and to see if others have seen this at their employers. My company got a new CEO and the dude is slashing everything, expecting 20% headcount reduction, lots of other changes. Today we received an email that our company matching contributions to our 401K next year will change to an annual contribution. Currently they match dollar for dollar up to 6%, that part stays the same. What will change is matching contributions will not be paid into a person's account until the last Bus Day of the year and you must be employed as of 12/15 to receive them.

So this company is going down the tubes and I am trying to get my ducks in a row to start actively looking for another position. I think it unlikely that I will be around for all of next year either through possible layoff or by finding another job. Seems like a no brainer to turn off 401K contributions starting January 1st and to put that money in either a Roth (if I qualify due to FBG money) or some other investment vehicle. Wondering if I am thinking about this incorrectly or missing anything?

Do you already max your Roth IRA? If not, probably makes sense to do that first and then any excess you feel comfortable into your 401K (even if no match it’s still a good investment vehicle). 

The other thing to remember here is that a new employer would typically have a lag before you start getting a match there too (and sometimes a month or quarter for eligibility). So it may make sense to front load the 401k actually if you won't have it as an option later in the year. You can always put money into the Roth even while unemployed.

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Interested in folks take on the right play here.

My 16 year-old son (HS sophomore) just inherited $100K from his grandmother to be held in trust until he is 30 (unless the money is used for school, housing, or medical expenses).   We already are fortunate to have enough saved in a 529 to cover at least four years of any college (and possibly grad school/prof school as well, if necessary), so hopefully the money can remain untouched for at least 7-10 years.  

My son is very interested in finance and investments so I told him I would post here to get the FBG-expert take on where the trust should stash his money.  The kicker to make this more complicated - his mother and I both work in Federal oversight positions and our ability to invest in specific stocks or some sector funds is extremely limited.  We also would not be allowed to make frequent trades - all transactions need to be approved and any purchase has to be held for at least 30 days.  

So, based on these limitations and initial research, he proposed to put most of the money in a standard index fund, another portion in one or two sector funds, and a small amount (maybe 5-10 percent) as a "gamble" in a potential growth stock of his choosing (obviously only one that we would be permitted to hold).

Thoughts?

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37 minutes ago, scorchy said:

Interested in folks take on the right play here.

My 16 year-old son (HS sophomore) just inherited $100K from his grandmother to be held in trust until he is 30 (unless the money is used for school, housing, or medical expenses).   We already are fortunate to have enough saved in a 529 to cover at least four years of any college (and possibly grad school/prof school as well, if necessary), so hopefully the money can remain untouched for at least 7-10 years.  

My son is very interested in finance and investments so I told him I would post here to get the FBG-expert take on where the trust should stash his money.  The kicker to make this more complicated - his mother and I both work in Federal oversight positions and our ability to invest in specific stocks or some sector funds is extremely limited.  We also would not be allowed to make frequent trades - all transactions need to be approved and any purchase has to be held for at least 30 days.  

So, based on these limitations and initial research, he proposed to put most of the money in a standard index fund, another portion in one or two sector funds, and a small amount (maybe 5-10 percent) as a "gamble" in a potential growth stock of his choosing (obviously only one that we would be permitted to hold).

Thoughts?

Can a trust invest in real estate?

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2 hours ago, scorchy said:

Interested in folks take on the right play here.

My 16 year-old son (HS sophomore) just inherited $100K from his grandmother to be held in trust until he is 30 (unless the money is used for school, housing, or medical expenses).   We already are fortunate to have enough saved in a 529 to cover at least four years of any college (and possibly grad school/prof school as well, if necessary), so hopefully the money can remain untouched for at least 7-10 years.  

My son is very interested in finance and investments so I told him I would post here to get the FBG-expert take on where the trust should stash his money.  The kicker to make this more complicated - his mother and I both work in Federal oversight positions and our ability to invest in specific stocks or some sector funds is extremely limited.  We also would not be allowed to make frequent trades - all transactions need to be approved and any purchase has to be held for at least 30 days.  

So, based on these limitations and initial research, he proposed to put most of the money in a standard index fund, another portion in one or two sector funds, and a small amount (maybe 5-10 percent) as a "gamble" in a potential growth stock of his choosing (obviously only one that we would be permitted to hold).

Thoughts?

Seems like a very wise proposal to me 

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2 hours ago, scorchy said:

Interested in folks take on the right play here.

My 16 year-old son (HS sophomore) just inherited $100K from his grandmother to be held in trust until he is 30 (unless the money is used for school, housing, or medical expenses).   We already are fortunate to have enough saved in a 529 to cover at least four years of any college (and possibly grad school/prof school as well, if necessary), so hopefully the money can remain untouched for at least 7-10 years.  

My son is very interested in finance and investments so I told him I would post here to get the FBG-expert take on where the trust should stash his money.  The kicker to make this more complicated - his mother and I both work in Federal oversight positions and our ability to invest in specific stocks or some sector funds is extremely limited.  We also would not be allowed to make frequent trades - all transactions need to be approved and any purchase has to be held for at least 30 days.  

So, based on these limitations and initial research, he proposed to put most of the money in a standard index fund, another portion in one or two sector funds, and a small amount (maybe 5-10 percent) as a "gamble" in a potential growth stock of his choosing (obviously only one that we would be permitted to hold).

Thoughts?

Any particular sector funds you're looking at? Tech is already expensive, and I don't know what else you would want to hold that long without rotation. Would be my biggest concern with that approach. 

Alternatively, @tdoss would like to suggest an investment in tulips.

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35 minutes ago, scorchy said:

I think so.  Unfortunately, not sure what real estate you can buy around here for $100K.  

I was thinking land in the outskirts of a growing region such Jacksonville. You'd have to do a lot of research. But about a 1,000 people were moving to Florida per day, before the pandemic. It's picked up again.   

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3 hours ago, scorchy said:

Interested in folks take on the right play here.

My 16 year-old son (HS sophomore) just inherited $100K from his grandmother to be held in trust until he is 30 (unless the money is used for school, housing, or medical expenses).   We already are fortunate to have enough saved in a 529 to cover at least four years of any college (and possibly grad school/prof school as well, if necessary), so hopefully the money can remain untouched for at least 7-10 years.  

My son is very interested in finance and investments so I told him I would post here to get the FBG-expert take on where the trust should stash his money.  The kicker to make this more complicated - his mother and I both work in Federal oversight positions and our ability to invest in specific stocks or some sector funds is extremely limited.  We also would not be allowed to make frequent trades - all transactions need to be approved and any purchase has to be held for at least 30 days.  

So, based on these limitations and initial research, he proposed to put most of the money in a standard index fund, another portion in one or two sector funds, and a small amount (maybe 5-10 percent) as a "gamble" in a potential growth stock of his choosing (obviously only one that we would be permitted to hold).

Thoughts?

does he work?  If so, can open a Roth and start that as well.  (Well...now that I read it again, not sure how a trust would come into play there....but it's something to look into at least)

 

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3 hours ago, scorchy said:

Interested in folks take on the right play here.

My 16 year-old son (HS sophomore) just inherited $100K from his grandmother to be held in trust until he is 30 (unless the money is used for school, housing, or medical expenses).   We already are fortunate to have enough saved in a 529 to cover at least four years of any college (and possibly grad school/prof school as well, if necessary), so hopefully the money can remain untouched for at least 7-10 years.  

My son is very interested in finance and investments so I told him I would post here to get the FBG-expert take on where the trust should stash his money.  The kicker to make this more complicated - his mother and I both work in Federal oversight positions and our ability to invest in specific stocks or some sector funds is extremely limited.  We also would not be allowed to make frequent trades - all transactions need to be approved and any purchase has to be held for at least 30 days.  

So, based on these limitations and initial research, he proposed to put most of the money in a standard index fund, another portion in one or two sector funds, and a small amount (maybe 5-10 percent) as a "gamble" in a potential growth stock of his choosing (obviously only one that we would be permitted to hold).

Thoughts?

Honestly i think you have the right idea.  Low cost index and a small gamble amount because it’s a pain to have to get permission every time you make a change and many indexes are pre approved.  Now if you really wanted to make trades you could get around it by having it “managed.”  I believe then your advisor would not need to get trades cleared.  But obviously they would take a cut and 100k isn’t all that much.  Honestly i think long term in a low cost index would be best.  20 years at ~6% and that will be like 320k.  That’s a nice start on retirement or in some places enough to buy a home in cash.

Edited by PinkydaPimp
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1 hour ago, Lomez said:

Any particular sector funds you're looking at? Tech is already expensive, and I don't know what else you would want to hold that long without rotation. Would be my biggest concern with that approach. 

Alternatively, @tdoss would like to suggest an investment in tulips.

Have to avoid healthcare and pharma.  He started researching clean energy.  We likely could change up every now and again, but the approval process is annoying enough that I wouldn't want to buy or sell more than once per year.  

I thought @tdoss was even a bigger fan of rakes.

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1 hour ago, Tiger Fan said:

does he work?  If so, can open a Roth and start that as well.  (Well...now that I read it again, not sure how a trust would come into play there....but it's something to look into at least)

 

From what I understand, the trust holds the money and can invest it in most ways the trustee (his mom) sees fit.  However, the trust can't open an IRA on someone's behalf.  Despite my son being pretty tight with money, I can't see a teenager going for an IRA anyway (no matter how good of an idea it is).  I think having money for a house down the road might be as far into the future as he can see right now.

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5 hours ago, scorchy said:

Interested in folks take on the right play here.

My 16 year-old son (HS sophomore) just inherited $100K from his grandmother to be held in trust until he is 30 (unless the money is used for school, housing, or medical expenses).   We already are fortunate to have enough saved in a 529 to cover at least four years of any college (and possibly grad school/prof school as well, if necessary), so hopefully the money can remain untouched for at least 7-10 years.  

My son is very interested in finance and investments so I told him I would post here to get the FBG-expert take on where the trust should stash his money.  The kicker to make this more complicated - his mother and I both work in Federal oversight positions and our ability to invest in specific stocks or some sector funds is extremely limited.  We also would not be allowed to make frequent trades - all transactions need to be approved and any purchase has to be held for at least 30 days.  

So, based on these limitations and initial research, he proposed to put most of the money in a standard index fund, another portion in one or two sector funds, and a small amount (maybe 5-10 percent) as a "gamble" in a potential growth stock of his choosing (obviously only one that we would be permitted to hold).

Thoughts?

As someone who reviews these, please just go with a simple fund. 

Maybe like 15-20% in ARK funds. 

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8 hours ago, ConstruxBoy said:

I feel like we had this discussion several months back, or at least stbugs and I did. I agree with you. His point about the same amount of money does make sense. However the diversity of having already taxed monies and the possibility that rates do go up makes it wise to have a portion in Roths. I'd say 20-30%. 

Also, I believe the latest tax laws did away with the stretch IRAs. So now your kids need to take the money out within 10 years. In the past, they could keep the accounts forever without paying any tax and just pass on the account to their kids. 

I'm aiming for 50% Roth total. But either way, having some in both seems prudent.

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7 hours ago, scorchy said:

So, based on these limitations and initial research, he proposed to put most of the money in a standard index fund, another portion in one or two sector funds, and a small amount (maybe 5-10 percent) as a "gamble" in a potential growth stock of his choosing (obviously only one that we would be permitted to hold).

Thoughts?

"Hey dad, my growth stocks are CGC, ACB, and TLRY.  Love those guys."

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7 hours ago, scorchy said:

Interested in folks take on the right play here.

My 16 year-old son (HS sophomore) just inherited $100K from his grandmother to be held in trust until he is 30 (unless the money is used for school, housing, or medical expenses).   We already are fortunate to have enough saved in a 529 to cover at least four years of any college (and possibly grad school/prof school as well, if necessary), so hopefully the money can remain untouched for at least 7-10 years.  

My son is very interested in finance and investments so I told him I would post here to get the FBG-expert take on where the trust should stash his money.  The kicker to make this more complicated - his mother and I both work in Federal oversight positions and our ability to invest in specific stocks or some sector funds is extremely limited.  We also would not be allowed to make frequent trades - all transactions need to be approved and any purchase has to be held for at least 30 days.  

So, based on these limitations and initial research, he proposed to put most of the money in a standard index fund, another portion in one or two sector funds, and a small amount (maybe 5-10 percent) as a "gamble" in a potential growth stock of his choosing (obviously only one that we would be permitted to hold).

Thoughts?

If you live in GA, talk to your Senator.

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4 hours ago, SoBeDad said:

I was thinking land in the outskirts of a growing region such Jacksonville. You'd have to do a lot of research. But about a 1,000 people were moving to Florida per day, before the pandemic. It's picked up again.   

Are they coming from north of the state or from south?

;)

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