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retirement planning

berth said:
If there's an earthquake, and the house burns, is that earthquake insurance, or regular insurance?
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It should be regular homeowners if it burns in a fire. Unless you were the one who lit the earthquake destroyed rubble on fire.
 
Although pretty sure earthquake insurance will say it's regular, and regular will say it's earthquake.
 
Ok, throwing my situation to the group before hiring an advisor to see if there's an easy answer from experience, or if I need economically educated advice...
I'm currently withdrawing a little less than 50% of my allotted 19,500 pre-tax into my deferred compensation plan at work. I have been paying my refinanced 3.5% mortgage on a 20yr payoff schedule. I have a 43k car loan at 3.14% that I could pay off, but it would cut my cash on hand in half (which is currently earning 1.78% compounding, so the earnings there are a near wash with the finance charge on the car). I plan on increasing my contribution to deferred comp to max, which I think I can do without any drastic changes to my life.

My question is this - I heard that perhaps losing the tax write off for the income tax may hurt more if I aim to retire early (in 20 years). I'd like to think dropping my monthly housing cost from 4400 to 1100 would allow that to happen for me (my pension would be ~3400/mo w/ COLA adjustments, not counting any other retirement income). However, someone at work (back per diem on retirement) made the comment that it was quite a sting to lose that write off on her taxes. She's young to be taking her SS, so I imagine she's not. I'm trying to prioritize what I should change if I need to. Is it a good idea to scrap the extra payment on the house regardless of my plans for the tax benefit? If it comes to needing to pay off the car, should I abandon that extra and use it to rebuild my savings?

The extra wrench is my wife. She plans on working until she probably physically can't anymore, since she likes being a teacher, so we will probably have some active income into our later years. However, her school is closing, so come June, she'll be looking for a new job (but possibly not taking anything if we end up pregnant). There's a chance that'll cause her to reconsider her life plans, but more immediately, what should my order of sacrifice be? Extra mortgage payment? Car payment (then maybe the car itself)? Extra in deferred comp? We have more than a year of her take-home pay in savings (unless we pay the car off), so there isn't an immediate scramble, but I'd like to know the order of moves I should make should money start to become an issue.
 
kingmoochr said:
Ok, throwing my situation to the group before hiring an advisor to see if there's an easy answer from experience, or if I need economically educated advice...
I'm currently withdrawing a little less than 50% of my allotted 19,500 pre-tax into my deferred compensation plan at work. I have been paying my refinanced 3.5% mortgage on a 20yr payoff schedule. I have a 43k car loan at 3.14% that I could pay off, but it would cut my cash on hand in half (which is currently earning 1.78% compounding, so the earnings there are a near wash with the finance charge on the car). I plan on increasing my contribution to deferred comp to max, which I think I can do without any drastic changes to my life.

My question is this - I heard that perhaps losing the tax write off for the income tax may hurt more if I aim to retire early (in 20 years). I'd like to think dropping my monthly housing cost from 4400 to 1100 would allow that to happen for me (my pension would be ~3400/mo w/ COLA adjustments, not counting any other retirement income). However, someone at work (back per diem on retirement) made the comment that it was quite a sting to lose that write off on her taxes. She's young to be taking her SS, so I imagine she's not. I'm trying to prioritize what I should change if I need to. Is it a good idea to scrap the extra payment on the house regardless of my plans for the tax benefit? If it comes to needing to pay off the car, should I abandon that extra and use it to rebuild my savings?

The extra wrench is my wife. She plans on working until she probably physically can't anymore, since she likes being a teacher, so we will probably have some active income into our later years. However, her school is closing, so come June, she'll be looking for a new job (but possibly not taking anything if we end up pregnant). There's a chance that'll cause her to reconsider her life plans, but more immediately, what should my order of sacrifice be? Extra mortgage payment? Car payment (then maybe the car itself)? Extra in deferred comp? We have more than a year of her take-home pay in savings (unless we pay the car off), so there isn't an immediate scramble, but I'd like to know the order of moves I should make should money start to become an issue.
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It really sounds like you need a new motorcycle.
 
SALT deductions are capped at 10 now. Did you take that in to account?
 
kingmoochr said:
Ok, throwing my situation to the group before hiring an advisor to see if there's an easy answer from experience, or if I need economically educated advice...
I'm currently withdrawing a little less than 50% of my allotted 19,500 pre-tax into my deferred compensation plan at work. I have been paying my refinanced 3.5% mortgage on a 20yr payoff schedule. I have a 43k car loan at 3.14% that I could pay off, but it would cut my cash on hand in half (which is currently earning 1.78% compounding, so the earnings there are a near wash with the finance charge on the car). I plan on increasing my contribution to deferred comp to max, which I think I can do without any drastic changes to my life.

My question is this - I heard that perhaps losing the tax write off for the income tax may hurt more if I aim to retire early (in 20 years). I'd like to think dropping my monthly housing cost from 4400 to 1100 would allow that to happen for me (my pension would be ~3400/mo w/ COLA adjustments, not counting any other retirement income). However, someone at work (back per diem on retirement) made the comment that it was quite a sting to lose that write off on her taxes. She's young to be taking her SS, so I imagine she's not. I'm trying to prioritize what I should change if I need to. Is it a good idea to scrap the extra payment on the house regardless of my plans for the tax benefit? If it comes to needing to pay off the car, should I abandon that extra and use it to rebuild my savings?

The extra wrench is my wife. She plans on working until she probably physically can't anymore, since she likes being a teacher, so we will probably have some active income into our later years. However, her school is closing, so come June, she'll be looking for a new job (but possibly not taking anything if we end up pregnant). There's a chance that'll cause her to reconsider her life plans, but more immediately, what should my order of sacrifice be? Extra mortgage payment? Car payment (then maybe the car itself)? Extra in deferred comp? We have more than a year of her take-home pay in savings (unless we pay the car off), so there isn't an immediate scramble, but I'd like to know the order of moves I should make should money start to become an issue.
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Do you mean contributing 50% of 19,500? Or do you mean you are contributing 19,500 and taking 50% of that as early withdrawals to pay down your mortgage? Hopefully you mean the first. If it's the second, I'd recommend to stop doing that.

I'd recommend to sell the car, buy a used Toyota or Honda in cash, and max your retirement contributions in the case you aren't already.

Do you itemize or take the standard deduction?
 
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Smash Allen said:
Do you mean contributing 50% of 19,500? Or do you mean you are contributing 19,500 and taking 50% of that as early withdrawals to pay down your mortgage? Hopefully you mean the first. If it's the second, I'd recommend to stop doing that.

I'd recommend to sell the car, buy a used Toyota or Honda in cash, and max your retirement contributions in the case you aren't already.

Do you itemize or take the standard deduction?
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Yes, I'm currently giving 9100/yr to my deferred comp, not touching it to pay for anything. I just converted it to max last night.

I believe we took the standard last year, but we had a bunch of medical expenses that played a role too, so I don't exactly recall.

I can currently pay for everything I have while paying down my mortgage and maxing my retirement, and I like the car I have, so I don't plan on selling it unless I need to. If the tax gain is only if itemized, and is maxed at 10k now, I don't see how that would play a major role in incentivizing me to carry a mortgage for an extra decade if I don't need to. That's the part I'm looking to understand most. Should something get tight in the future, I can pay the car off w/ the cash on hand, and potentially sell it if necessary.
 
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kingmoochr said:
Yes, I'm currently giving 9100/yr to my deferred comp, not touching it to pay for anything. I just converted it to max last night.
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Awesome :thumbup what are your allocations risk wise compared to your investment timeline?

kingmoochr said:
I believe we took the standard last year, but we had a bunch of medical expenses that played a role too, so I don't exactly recall.

I can currently pay for everything I have while paying down my mortgage and maxing my retirement, and I like the car I have, so I don't plan on selling it unless I need to. If the tax gain is only if itemized, and is maxed at 10k now, I don't see how that would play a major role in incentivizing me to carry a mortgage for an extra decade if I don't need to. That's the part I'm looking to understand most. Should something get tight in the future, I can pay the car off w/ the cash on hand, and potentially sell it if necessary.
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Mortgage Interest is the itemized deduction and isn't capped at 10k. The 10k State And Local Taxes cap is usually made up of property taxes and income tax. The trick is to see if you have more than 14k in itemized deductions, which is where the Mortgage Interest comes into play. If you hit the 10k cap and have 14k in itemized deductions, you are better off itemizing and having the house payment.

All that said, the SALT cap is set to expire in 2025 without a provision to extend it. Same with the large standard deductions.
 
Smash Allen said:
Awesome :thumbup what are your allocations risk wise compared to your investment timeline?



Mortgage Interest is the itemized deduction and isn't capped at 10k. The 10k State And Local Taxes cap is usually made up of property taxes and income tax. The trick is to see if you have more than 14k in itemized deductions, which is where the Mortgage Interest comes into play. If you hit the 10k cap and have 14k in itemized deductions, you are better off itemizing and having the house payment.

All that said, the SALT cap is set to expire in 2025 without a provision to extend it. Same with the large standard deductions.
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I'm at high risk with the allocations, I'm only 36 right now. Would you say then that carrying the mortgage until I'm claiming social security might be a wise move regardless of situation?
 
kingmoochr said:
I'm at high risk with the allocations, I'm only 36 right now. Would you say then that carrying the mortgage until I'm claiming social security might be a wise move regardless of situation?
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If you have saved enough to have six months of expenses in reserve, I would recommend paying off debts, highest interest rates first, work your way down to your mortgage. I recommend taking a look at the link below, a handy flowchart :thumbup

lSoUQr2.png
 
Wow that's cool.

I will run through it. I want to retire at 55 in 14ish years. I mean if I sell the house I can easily retire in Canada at that point if things aren't going well.

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I paid for the earthquake insurance today thanks for all the help.
 
kingmoochr said:
Sounds like I should Google mega backdoor Roth IRA? Maybe turn safe search on first?
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My buddy has explained it to me twice but I can't remember how it works.

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You know your company can match your 401k to like $54,000 or something insane like that? I wonder why more companies don't offer that in lieu of salary.
 
HappyHighwayman said:
My buddy has explained it to me twice but I can't remember how it works.

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You know your company can match your 401k to like $54,000 or something insane like that? I wonder why more companies don't offer that in lieu of salary.
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retirement benefits are not typically offered in lieu of salary. they fall in the category of acquisition or retention incentives (an inticement to join or remain with the company to gain or continue to receive and grow the benefit). all companies who need top talent, and have the means to compete for it, put the full package together. stock (assuming its worth anything), medical benefits, retirement and of course, salary and bonuses, are all part of the deal (total compensation). employees need to model out the numbers to make ‘choice of employment’ decisions. you can bet your ass that the employers have done so. and they probably know the competitive market way better than the average employee. and they’ll likely try to lowball anyone they think is ignorant of the full landscape, and their options.

and for those companies who can’t compete for top talent - the algorithm remains the same. it’s still a question of getting the best talent they can for what they are able to offer. and retirement benefits are perhaps next only to medical benefits in terms of attracting applicants.
 
The entire 401k system is a farce. It was started so wall street companies could make money off YOUR money. If it was a true retirement fund, then the money you withdraw after you retire would be tax free. It really sucks. I made a rather large withdrawal to pay for my retirement house. The seller insisted on a cash deal. Welp, now my income for that year just shot through the roof, and here came a huge tax bill.

Mad
 
Maddevill said:
The entire 401k system is a farce. It was started so wall street companies could make money off YOUR money. If it was a true retirement fund, then the money you withdraw after you retire would be tax free. It really sucks. I made a rather large withdrawal to pay for my retirement house. The seller insisted on a cash deal. Welp, now my income for that year just shot through the roof, and here came a huge tax bill.

Mad
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I'm 63 and jumped on the IRA "farce" train when I was 21, then, when available, jumped on the 401k "farce" train.

Retired at 51 with my wife and I having more than $1 million combined in our "farce" accounts most of which is still there growing. :thumbup

Your "farce" account bought you a home, unfortunately withdrawing early yielding a tax hit.

BUT the appreciation in value on that house may eventually cover that tax hit.
 
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