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Personal Finance Advice and Education! (10 Viewers)
- Thread starter No. 16
- Start date
Nice, thanks. I’m going to be up to my eyes in college costs the next 10 years so I might not use it yet but that’s an interesting option for the savings I have invested that I hope to not touch.
Just having another IRA open or trying to use the same IRA? Could you open a new IRA account and then it’s not complicated?
Are you talking backdoor Roth, or Mega Backdoor Roth?
Backdoor Roth = transferring after tax money from a traditional IRA to a Roth. Note if there was any pre-tax money in the traditional IRA, you need to pay taxes on that prior to transfer
Mega Backdoor = transferring after tax contributions into a 401k via an "in-service" transfer if allowed by your 401k plan through your employer. The only taxes that would be paid here is if there are any gains on the after tax contributions that you make. If you call for the transfer the day after they are deposited, the gains (if any) should be nominal.
You should be doing the Backdoor first and then the mega backdoor after if you're eligible.
-OZ-
Footballguy
Sand
Footballguy
Leeroy Jenkins
Footballguy
My wife hasn’t worked the last 5 years (kids) and she had drained her 401k when we bought our house. I have cash sitting around now from my bonus and real estate sales (work related) and I want to replenish what she spent. In what vehicle should I invest on her behalf? A roth?
Also, in general, how are you allocating your investments? Allow for x% in IRA, mutual funds, individual stocks, real estate, money market, cash etc? What percentage of income are you contributing to your 401k (my employer only matches 3%)
tia
Also, in general, how are you allocating your investments? Allow for x% in IRA, mutual funds, individual stocks, real estate, money market, cash etc? What percentage of income are you contributing to your 401k (my employer only matches 3%)
tia
-OZ-
Footballguy
Hindsight is 20/20 but why would she/you drain retirement for a house? Seems a really bad idea.
If eligible, Roth IRA is the first thing I'd usually invest in, after you get the match from the 401k.
Your second paragraph mixes concepts. You usually have mutual funds or ETFs in the IRA and 401k.
Our plan, in order:
1. Get the full match in 401k/TSP. For us this is all Roth right now.
2. max both Roth IRAs.
3. Max 401k/TSP over the course of the year.
4. $500 each month to M1 (no tax benefits)
5. $250 monthly to fundrise.
6. Keep savings just over $10,000, in a 2.1% yield (might change if I find a higher yield but for now it's fine)
* ETA: $10k is less than recommended for most, but my pension covers necessities. If I lost my job (really unlikely but shutdowns happen) we'd be okay for a while.. Know thyself.
7. Leftover to E-Trade (free ETF trades)
I'm using different versions of Paul Merriman's portfolios for each account (2 Roth IRAs, 2 TSP accounts)
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proteus126
Footballguy
You can begin withdrawal at 59.5
You can even begin earlier and without penalty if you follow the "Substantially Equal Payment" rules.
Long Ball Larry
Footballguy
Sand
Footballguy
Gawain
Footballguy
Leeroy Jenkins
Footballguy
Sand
Footballguy
-OZ-
Footballguy
Sand said:
Technically sure. But (if I'm wrong I've been wrong for 16 years), there's no real difference in the account between a "spousal" and a normal IRA. When I set it up for her she was working but I've been contributing to her account without her bringing income since son 1 was born.Gawain said:
-OZ-
Footballguy
Worth listening, about diversification:
https://paulmerriman.com/wp-content/uploads/2019/07/SoundInvesting-7-17-19.mp3
https://paulmerriman.com/podcasts/
https://paulmerriman.com/wp-content/uploads/2019/07/SoundInvesting-7-17-19.mp3
https://paulmerriman.com/podcasts/
Tom Hagen
Footballguy
Correct. A spouse's eligibility to make an IRA contribution is determined by the spousal IRA rules, but there is no difference in the IRA account itself
Leeroy Jenkins
Footballguy
What is the benefit, if any, of doing a spousal IRA for your stay at home wife if your deduction is 100% phased out due to income/having an employer plan?
Gawain
Footballguy
Leeroy Jenkins
Footballguy
Depends on my bonus. Last year my W2 income would have exceeded the limit.
I am debating whether I need a financial planner or whether I can do this all myself.
Gawain
Footballguy
As long as your wife doesn't have other IRAs you can fund a traditional and then convert. Fidelity/Vanguard/Schwab should be able to walk you through the process.
ghostguy123
Footballguy
Just came up with a random idea with my mom over dinner this evening.
I owe about 70 grand on my house with about 10 years left at 3.75%. I have been planning to pay extra on the mortgage.
My mom has some extra saving laying around, and she would give me a small portion (10 grand) that I will apply to the mortgage right away.
Then, I give her back $1,000 per month until the loan is paid off, so 10 months. Then, I will give her a "bonus". She says 500 bucks is cool.
Running numbers it looks like the total interest I would pay between balance 70k to 60k is around 4 grand. I am speeding through that 4 grand and giving her 500 bucks.
Is my math right? Is this a no brainer move for both of us? I mean, her money will just sit in her savings doing nothing. She will not invest or do anything like that, so guaranteed she makes no money on that 10 grand.
I was going to pay an extra grand a month anyway, so this just seems to make too much sense.
Convince me I am wrong.
I owe about 70 grand on my house with about 10 years left at 3.75%. I have been planning to pay extra on the mortgage.
My mom has some extra saving laying around, and she would give me a small portion (10 grand) that I will apply to the mortgage right away.
Then, I give her back $1,000 per month until the loan is paid off, so 10 months. Then, I will give her a "bonus". She says 500 bucks is cool.
Running numbers it looks like the total interest I would pay between balance 70k to 60k is around 4 grand. I am speeding through that 4 grand and giving her 500 bucks.
Is my math right? Is this a no brainer move for both of us? I mean, her money will just sit in her savings doing nothing. She will not invest or do anything like that, so guaranteed she makes no money on that 10 grand.
I was going to pay an extra grand a month anyway, so this just seems to make too much sense.
Convince me I am wrong.
Judge Smails
Footballguy
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ghostguy123
Footballguy
This month the interest is 215. I am busy at the moment and cant give the rest of the exact numbers but you get the idea
Juxtatarot
Footballguy
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ghostguy123
Footballguy
Yes. Appears to be a win-win for both.
How much would I save applying an extra thousand per month the next 10 months to my mortgage payment as opposed to dropping a 10 grand lump sum now.
The part I forgot was my own personal interest savings overall if I was to add that thousand every month for 10 months and subtract that from the 4 grand interest savings I projected, so really closer to 3 grand.
Also, 11% seems high. Basically paid in a year, I am not giving her 1100, unless I am factoring something wrong here.......edit........yes I suppose that would be correct since I am making the monthly payment.
Either way, I am wanting to see if someone can show me how this is bad for me.
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Juxtatarot
Footballguy
You would be worse off. You’re better off paying the extra $1,000 to your mortgage for 9 months and $1,500 the 10th month. The interest rate is much lower.
ghostguy123
Footballguy
So I will save LESS than 500 bucks in interest if i apply 10 grand now as opposed to paying an extra grand for 9 months and then a 1500 payment month 10?
I suppose that is why I posed this question.
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Juxtatarot
Footballguy
You’re not giving her no money for a year, you’re paying down principal rapidly. Your balance would only be $4,000 in 6 months. I don’t have a calculator for this payment schedule but it’s very close to 11%. (Give or take a percentage or so.)
ghostguy123
Footballguy
Yes I get that now.
However the question is what would I save? Doing this compared to adding the grand a month for 9 months then 1500 month 10.
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Juxtatarot
Footballguy
You will save more money overall by paying down principal over the 10 months like I mentioned than by getting that high interest rate loan from your mom.So I will save LESS than 500 bucks in interest if i apply 10 grand now as opposed to paying an extra grand for 9 months and then a 1500 payment month 10?
I suppose that is why I posed this question.
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Juxtatarot
Footballguy
It would take a while to do the savings calculations. If nobody else does before me, I’ll figure this out at work tomorrow if it’s slow.
ghostguy123
Footballguy
Heck even if it was a total break even I would rather give my mom 500 bucks instead of giving it to the lender.
Isnt there an extra payment calculator out there that let's you input one payment at a time for the 10 payments, and then project the rest out from there without any extra principle added?
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Juxtatarot
Footballguy
The easiest way to think about it is you’re paying down only $10,000 in 10 months if you get the loan from your mom but $10,500 if you pay extra on your mortgage over 10 months instead. The savings by paying down the $10,000 right away won’t be as much because the mortgage interest rate is less than the 11% to your mom.
xulf
Footballguy
All I know is that situations where both parties feel like they are doing the other a favor can get tricky...especially with money.
ghostguy123
Footballguy
Not doubting you I would just like to see the exact numbers. I would have to play around to figure out the exact way to do that. I haven't worked with numbers like this in quite a while. Nurses dont use math.
However, on the amortization table I will be paying more principle each month if the 10 grand is laid down up front. How much?? Hmmmm
I guess I can see the payoff date in each scenario and see how much faster the loan would be paid off with the 10 grand down as opposed to the other way.
But then there is the whole "invest the 500 now for the next 7-8years". Ugh. Done with this. I guess I just didnt think it through.........hence why these days I ask people this kinda stuff before I ever actually do anything.
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ghostguy123
Footballguy
Ok last post on this since I think I just proved my self to be stupid.
I looked at what the interest portion of the what the payment would be if the balance was 60k, then multiplied that by 10. Then looked at what the interest would be for each payment until I made the 10 payments. Savings was only like 200 bucks.
I had got the idea from the stupid youtube videos I recently watched about using a HELOC to pay down your mortgage fast. Turns out I am not going to do either and, instead, I am gonna do it the ol fashioned way by just paying extra on the principle.
Sorry for the barrage of clutter.
I looked at what the interest portion of the what the payment would be if the balance was 60k, then multiplied that by 10. Then looked at what the interest would be for each payment until I made the 10 payments. Savings was only like 200 bucks.
I had got the idea from the stupid youtube videos I recently watched about using a HELOC to pay down your mortgage fast. Turns out I am not going to do either and, instead, I am gonna do it the ol fashioned way by just paying extra on the principle.
Sorry for the barrage of clutter.
wilked
Footballguy
pollardsvision
Footballguy
This is FBG's. Go ahead and move the $70K out of your back up to the back up emergency fund, pay off the house, give your Mom $500 because she's your Mom, then show her what she could do with her spare cash instead parking it in a checking account.
-OZ-
Footballguy
Long Ball Larry
Footballguy
got my 14-year-old daughter to read the first half of this book this summer. She's been away for most of the summer. Texted her today to ask her what she has learned.
so i asked her if debt was good or bad.
at least it's a start...
Freak Show
Footballguy
My daughter is 21, and started her first job. The place she works matches up to 6% on a 403b. Does anyone know anything about Schwab Target 2055 as a Contribution Investment Selection?
RUSF18
Footballguy
Just looking at easily available info, looks fine. Very low expense ratio which is most important.
She may want to choose an even longer term fund if they offer them.
culdeus
Footballguy
Sand
Footballguy
Not bad at all.
Mine is 14, as well, and your message reminds me how much I despite accepted text grammar. Maybe I'm the only one who uses proper grammar in texts.
berndog
Footballguy
I’m in a similar situation where I will earn 12-14k this year doing website management and online marketing. I need to find ways to lower my taxes so will look into the SEP IRA.
Any other ideas to keep more money in my pocket?
Freak Show
Footballguy
NutterButter
Footballguy
The googles is telling me that expense ration is .74%. Is that what you're seeing b/c that's not good at all?
