The Intersection of FIRE and Disney

[MickeyMouseCD524]

Oh I just saw the posts on financial spreadsheets. Here's what I track:

- Current balance in all accounts both checking and any debts (student loans were the WORST)
- How much I'm earning in interest every month from my high yield savings accounts.
- 401k contributions
- Estimated yearly pay out for my dividends in my IRA and brokerage
- I started a sinking funds page but it quickly died....
- I also track budgets and line items for any large expenses. Like a trip to Disney that budgeted to the penny and then add a buffer on top of that.
- I only started doing monthly Net Worth Updates a la One Big Happy Life and it's been super helpful.

 

[first*toright]

Finally have a good portion of my 2019 YE summary complete. Still need to verify a few numbers once the W2s arrive but it should be a pretty decent summary.

It looks like our savings rate *may* have increased by a percentage or two which is surprising because I feel like we spent a lot this year. At first I thought it decreased but then added in mortgage principle (to remain consistent with 2018) and it jumped up a bit.

I find it interesting to look at the rate with taxes in the denominator and then with them removed. Of course then I realize just how much I pay in taxes when my savings rate jumps 14% by removing them as an expense

My initial calculations show we also added about 22% to our net-worth with retirement investments, the very good market, and increasing our liquid cash savings (emergency fund).

Thank you to all on this thread, your advice, ideas, and listening ears are very much appreciated. It's wonderful to have a group of folks who value experiences like Disney just as much as they do reaching financial independence. A rare find indeed!

Yeah - savings rate would look pretty different if you're using pre-tax income vs. earnings after taxes! Congrats - that looks like a good year.

 

[WVMomof3]

DH and I have been working on new spreadsheets! Fun times! lol My friends think I am nuts, but they also have zero idea how much money they spend or even have. shudder. We finally got net worth going in a spreadsheet! And a great time to start tracking it because we broke a milestone without even realizing it. Woop woop Had an idea in the back of my head but it is nice to see it all nicely in a spreadsheet. I am sure we will break the same milestone again, lol, as the markets fluctuate but yay!!

 

[SouthFayetteFan]

DH and I have been working on new spreadsheets! Fun times! lol My friends think I am nuts, but they also have zero idea how much money they spend or even have. shudder. We finally got net worth going in a spreadsheet! And a great time to start tracking it because we broke a milestone without even realizing it. Woop woop Had an idea in the back of my head but it is nice to see it all nicely in a spreadsheet. I am sure we will break the same milestone again, lol, as the markets fluctuate but yay!!

On the way up we celebrate the milestones. On the way down we celebrate stocks on sale... Win/Win...right??

 

[bernina]

On the way up we celebrate the milestones. On the way down we celebrate stocks on sale... Win/Win...right??

True FIRE mentality. Please repost this when the market turns It's an excellent reminder to find the positive in things.

 

[Carol_]

deleted

 

[bernina]

I just found out my company allows after tax 401k contributions as well as in service rollovers. Does anyone have experience with this?

Looks like the 2020 limit for tax deferred retirement accounts is $56k.

I believe my pre tax + company match + any post tax must be no more than $56k, is that correct? The $6k I put into Roth is not part of that ceiling (or is it)?

So in theory I can contribute much more than the $6k I had been putting into a Roth IRA each year.

Assuming I'm already maxing out pre tax 401k contributions, $6k to Roth IRA, and fully funding our HSA, then it sounds like adding extra to my 401k after tax is the way to go (no debt other than low interest mortgage)?

I would then roll over those after tax contributions so they can grow tax free into our Roth IRA. A co-worker is currently doing this and rolling into his Fidelity Roth IRA without issues (it's all automated and our retirement account service provider sends the check directly to Fidelity in this case). I would be sending to Vanguard as that's where our funds are and will of course confirm they will do this.

So what am I missing? This is money that would just end up being invested in our Vanguard brokerage in VTSAX or similar. That account is more liquid for non retirement, but with the rollover to Roth we can still withdraw contributions tax free. We have an emergency fund and access to a low rate HELOC, so I don't think we'd need to access anything other than contributions if something big came along.

I will of course do a lot more research on limits and my specific plan options, but this seems like a really great way to get more than $6k/year into a Roth IRA.

 

[runwad]

@bernina what is an inservice rollover?

Is it when your company will allow you to roll money you have in your 401k now to your Roth 401k? I've been after my company to do this, but alas, since I'm the only one who is interested in doing it, there isn't a real urgency for them to put it together. I just invest all money to my Roth 401k option now. But would love to roll some of this money while my kids are in college and I get the AOTC that would help cancel out any taxes I owe!

EDIT, I do know your 6k contribution to a Roth IRA is independent of what you can do inside your 401k

 

[pillow]

I would then roll over those after tax contributions so they can grow tax free into our Roth IRA. A co-worker is currently doing this and rolling into his Fidelity Roth IRA without issues (it's all automated and our retirement account service provider sends the check directly to Fidelity in this case). I would be sending to Vanguard as that's where our funds are and will of course confirm they will do this.

If you mix pre-tax and post-tax funds in your 401K, when you rollover, you have to prorate. For example, assume you have 95K in pretax funds in the 401K and 5K post tax funds. If you transfer 5K out, you'd treat $250 (5%) of that as post tax money and the rest (95%) as pre tax funds - so you'd be paying taxes on $4,750 at conversion. So I guess you could do it, but there can be a pretty big tax consequence. Plus, it sounds like an accounting nightmare lol.

https://www.irs.gov/retirement-plans/rollovers-of-after-tax-contributions-in-retirement-plans

 

[bernina]

@bernina what is an inservice rollover?

Is it when your company will allow you to roll money you have in your 401k now to your Roth 401k? I've been after my company to do this, but alas, since I'm the only one who is interested in doing it, there isn't a real urgency for them to put it together. I just invest all money to my Roth 401k option now. But would love to roll some of this money while my kids are in college and I get the AOTC that would help cancel out any taxes I owe!

EDIT, I do know your 6k contribution to a Roth IRA is independent of what you can do inside your 401k

I think the proper term is actually in service transfers the more I read. I had rollovers in my head when I was typing

What this means is I'm able to transfer my after tax contributions into my Roth IRA while I'm still working. Most employers only allow this once you terminate employment. I believe this is one of the keys to making the process a lot simpler as well as taking advantage of tax free growth in the Roth IRA while I'm still working.

If you mix pre-tax and post-tax funds in your 401K, when you rollover, you have to prorate. For example, assume you have 95K in pretax funds in the 401K and 5K post tax funds. If you transfer 5K out, you'd treat $250 (5%) of that as post tax money and the rest (95%) as pre tax funds - so you'd be paying taxes on $4,750 at conversion. So I guess you could do it, but there can be a pretty big tax consequence. Plus, it sounds like an accounting nightmare lol.

https://www.irs.gov/retirement-plans/rollovers-of-after-tax-contributions-in-retirement-plans

Thank you for the article and word of warning. This is exactly the kind of dialogue I was hoping for as I don't really have many folks outside these forums to bounce ideas off of.

In doing more research it appears that by allowing in service transfers and due to the fact that my plan tracks pre tax and after tax contributions and growth separately, this may lead to the ability to more easily do a mega backdoor Roth IRA contribution.

In theory each year (or more frequently if the plan allows) I would transfer the after tax contributions plus any gains (which the plan tracks) to a Roth IRA. By allowing in service transfers instead of only at retirement/termination, the amount of growth is minimized (since it has at best 1 year to grow).

Now I just need to sit with my co worker who is currently doing this as well as continue reading through our plan literature to ensure what I want to do is actually possible.

I'm open to any and all feedback and would love to hear if there are others doing something similar.

 

[georgina]

If you mix pre-tax and post-tax funds in your 401K, when you rollover, you have to prorate. For example, assume you have 95K in pretax funds in the 401K and 5K post tax funds. If you transfer 5K out, you'd treat $250 (5%) of that as post tax money and the rest (95%) as pre tax funds - so you'd be paying taxes on $4,750 at conversion. So I guess you could do it, but there can be a pretty big tax consequence. Plus, it sounds like an accounting nightmare lol.

https://www.irs.gov/retirement-plans/rollovers-of-after-tax-contributions-in-retirement-plans

Something changed recently with this I believe. My DD's company also started a program last year similar to bernina's with Fidelity where she can make after tax contributions and roll them into a Roth periodically, paying tax on any earnings they made in the quarter. According to the Fidelity website it depends on the specific plan's rules and tracking.

https://www.fidelity.com/viewpoints/retirement/IRS-401k-rollover-guidance
I don't know how this jibes with a regular Roth contribution as it is a software company in SF and she is not eligible to contribute to a Roth due to her salary.

 

[pillow]

Something changed recently with this I believe. My DD's company also started a program last year similar to bernina's with Fidelity where she can make after tax contributions and roll them into a Roth periodically, paying tax on any earnings they made in the quarter. According to the Fidelity website it depends on the specific plan's rules and tracking.

https://www.fidelity.com/viewpoints/retirement/IRS-401k-rollover-guidance
I don't know how this jibes with a regular Roth contribution as it is a software company in SF and she is not eligible to contribute to a Roth due to her salary.

This is terrific! @bernina Sounds like this might work for you then. Curious to know how it plays out.

 

[bernina]

Something changed recently with this I believe. My DD's company also started a program last year similar to bernina's with Fidelity where she can make after tax contributions and roll them into a Roth periodically, paying tax on any earnings they made in the quarter. According to the Fidelity website it depends on the specific plan's rules and tracking.

https://www.fidelity.com/viewpoints/retirement/IRS-401k-rollover-guidance
I don't know how this jibes with a regular Roth contribution as it is a software company in SF and she is not eligible to contribute to a Roth due to her salary.

Sounds like good news for your DD too! We're phased out of Roth IRA as well and have been doing the backdoor method for 5 or so years. We're at the point where we have enough liquid or easily accessible options for home expenses as well as unplanned events and all we were really focusing on was VTSAX in a brokerage account. I like this option better as I can still get a VTSAX like fund but the money will grow tax free.

I'll keep you all posted on how it plays out for me.

 

[tex1989]

I track everything in Excel. Checking, savings, retirement accounts, loan balances, etc. I also have rough value estimates of all our major assets, house, cars, a farm I own, etc. That way I just have it all linked to the individual pages and it basically gives me a net worth calculation when ever I want to look at it. Of course it really helps that my personal investments are with Fidelity and my company 401k and retirement are with Fidelity so I have one page online that lists it all including my wifes accounts. Very easy to track that way. I also have future cashflows based on different retirement dates so I can see how those are progressing. I do a lot of modelling and analysis in my job so building sheets is something I do every day. The only persistant and hard question is always how much is enough? If I quit today I would have enough it would just mean a little less spending in retirement then if say I waited 3 years.

 

[RamblingMad]

I track everything in Excel. Checking, savings, retirement accounts, loan balances, etc. I also have rough value estimates of all our major assets, house, cars, a farm I own, etc. That way I just have it all linked to the individual pages and it basically gives me a net worth calculation when ever I want to look at it. Of course it really helps that my personal investments are with Fidelity and my company 401k and retirement are with Fidelity so I have one page online that lists it all including my wifes accounts. Very easy to track that way. I also have future cashflows based on different retirement dates so I can see how those are progressing. I do a lot of modelling and analysis in my job so building sheets is something I do every day. The only persistant and hard question is always how much is enough? If I quit today I would have enough it would just mean a little less spending in retirement then if say I waited 3 years.

I keep working because of healthcare. It’s really expensive to buy it on your own.

 

[tex1989]

So I am lucky because if I retire prior to 65 (Medicare) my company still provides healthcare at the same rate I currently pay as an active employee till I hit 65 then they provide the supplemental policy for the 20% so that's not as big an issue for me as it is to many.

 

[ski_mom]

So I am lucky because if I retire prior to 65 (Medicare) my company still provides healthcare at the same rate I currently pay as an active employee till I hit 65 then they provide the supplemental policy for the 20% so that's not as big an issue for me as it is to many.

That is great! My company allows us to stay on the policy, but we have to pay 100% of it versus the 28% that we pay as an active employee.

 

[georgina]

I hear you on healthcare! DH worked for his company for 37 years, and back when he started they offered retiree health benefits (not so for newer hires!) He retired at 63 and we were both covered by the company plan for about $200 a month each. He turned 65 last year (I am 8 years younger) and I am able to stay on the plan for the same monthly rate. We are EXTREMELY fortunate with this. We plan to move in a few years and I am not sure what will happen with my care then, it is a local PPO. They also give him $125 a month toward his medicare supplement policy.

 

[RamblingMad]

I hear you on healthcare! DH worked for his company for 37 years, and back when he started they offered retiree health benefits (not so for newer hires!) He retired at 63 and we were both covered by the company plan for about $200 a month each. He turned 65 last year (I am 8 years younger) and I am able to stay on the plan for the same monthly rate. We are EXTREMELY fortunate with this. We plan to move in a few years and I am not sure what will happen with my care then, it is a local PPO. They also give him $125 a month toward his medicare supplement policy.

Lucky. I know folks with 7 and 8 figure retirement accounts that kept working until they could get Medicare.

 

[georgina]

I could see holding out with a 7 figure retirement account, but someone with 8 figures could easily pay for their own healthcare. I'm frugal, but I do not understand that.
Reminds me a bit of those retirement seminars where they try to convince you that you need to hide all your assets in trust schemes so you can get the taxpayers to pay for your nursing home care. Personally I find that immoral, if I had that much money I could just pay for my own care.