Financial moves to make before 12/31

[Parliament 14593]

13 hours ago, Vintner said:

Roth 401Ks are goldmines for the crowd under 35. At least do the company match but the best advice is to contribute all that you can.  It’s hard to see the benefit when you are early in your career, because it’s taking away from your discretionary spending aka “fun budget”. The first $100K is the hardest but that will grow and the next $100K comes faster (barring financial crises…but that’s when things get cheap and markets will recover) and eventually the annual growth of your investments exceeds your contributions.
 

Keep the pedal to the metal if you can but I will say that as your earnings increase throughout your career you may choose to shift some to traditional 401K in order to moderate/minimize current taxes. 

Regardless of your vehicle keep making the biggest contribution that you can afford and keep it all invested in something.  Most companies 401K managers have crappy money market vehicles.

 

1) Your first >5 years out of college just crank your withholding to the max (likely 20%).  You were poor in college; just stay poor a few more years.  As stated above, you're gonna prime the pump and get you a gold mine someday.

 1a) They tell me your first million is a lot harder to make than your second. I hope so.  

[StassneyHorn 6766]

There’s a good amount of finance influencers/youtubers ( I fucking hate that I just typed that out) that say getting to 100k is harder and takes more effort than getting to the first million, and that’s what every person in their 20s should focus on—getting to 100k. 

[EastHorn 287]

On 11/2/2024 at 3:24 PM, StassneyHorn said:

There’s a good amount of finance influencers/youtubers ( I fucking hate that I just typed that out) that say getting to 100k is harder and takes more effort than getting to the first million, and that’s what every person in their 20s should focus on—getting to 100k. 

The Money Guys are good but I feel like use it to sell their AUM but less militant than Dave Ramsey. White coat investor is good even if not a doctor. He can get pretty advanced but overall good advice. 

[The Original Greaser Bob 2888]

On 9/13/2024 at 10:23 PM, Muny_Tex said:

On personal front, my plan for end of year is to continue tradition of only having kids born in Q4 so we can optimize the full year Child Tax Credit before all the bullshit comes due. 

Per Malcolm Gladwell's Outliers, your kids will be shitty hockey players.

[Nice Guy Eddie 13725]

For the max 401k crowd (traditional or roth) check to see if your employer allows for after tax contributions. I'm in year 6 of my employment and just learned that I can contribute an additional 10K as after tax dollars to my traditional 401k and then have it automatically converted to my roth 401k account. It's a way of pushing up to $10K extra into my roth via payroll deductions.

Backdoor roth IRA contributions are tricky for me tax wise because I have traditional IRA balances. I believe this works around that issue or at least I haven't discovered it yet. as always don't take tax advice from someone named after a movie tough guy.

 

Edited November 15 by Nice Guy Eddie

[BottleRocket 659]

Owen Wilson?

[BearSchlong 8238]

Per Malcolm Gladwell's Outliers, your kids will be shitty hockey players.

Greyshirted my kid in Kindergarten so he would be one of the older kids in his class. Worked pretty well.

[RDCanecutter 26871]

When I want to save money, I just use the credit card. That way it's free.

[StassneyHorn 6766]

Some motivation around the holidays

Number of 401(k) ‘millionaires’ just jumped by 9.5%
https://www.cnn.com/2024/12/05/business/401k-balances-fidelity/index.html

Highlighted what I thought was important

Spoiler

A new analysis by Fidelity Investments, one of the largest providers of 401(k) retirement plans, found that the number of accounts with balances topping $1 million rose by 9.5% in the third quarter.

All told, of the roughly 24 million participant accounts in the 401(k) plans for which Fidelity serves as record keeper, 544,000 of them had balances over $1 million, up from 497,000 in the second quarter.

The average balance in that group was $1.616 million, up from $1.595 million in the prior quarter.

Among Gen Xers — who are next in line for retirement — those who have been saving for at least 15 years had an average balance of just under $600,000, up 6% from the quarter before, according to Fidelity data.

And it found that the average balance for all participants who were saving for five, 10 or 15 years rose during the quarter.

The growth was due not just to market gains, but also a strong average savings rate of 14.1%, which includes employee contributions (9.4%) plus an employer match (4.7%).

“We are continuing to observe a dedication to saving for retirement, with contributions to these vehicles holding steady if not increasing,” said Sharon Brovelli, president of Workplace Investing at Fidelity Investments. “Consistent retirement contributions during various market cycles is important … (since they) will help set Americans up for a future of financial wellness and security.”

For many 401(k) participants, however, their balances are far below $1 million or even half that.

The average balance for all participant accounts hit a record high, but it was still just $132,300, up 4% from $127,100 in the second quarter. And the median — which represents the level below which half of the accounts had lower balances — was just $30,600.

Of course, these measures are taken across the accounts of people of all ages, income levels and tenures, so they include small balances from relatively new or young employees, who haven’t been saving in a company plan for long; as well as lower-income employees, who may not be able to save a lot regardless of age or tenure.

A cure for cashing out

Those lower-income employees — who tend to be disproportionately minorities — may be among those most likely to cash out their 401(k) savings when they change jobs if their balances are small (e.g., under $7,000), instead of rolling the money over into their new employer’s plan or a tax-advantaged IRA.

Cashing out is costly in a few ways: The distribution will be subject to income tax the year it’s taken; and if the person taking the money is under 59-1/2, then they will be hit with a 10% early withdrawal penalty too.

And, over time, they will also lose out on the benefit of tax-deferred growth on that money had they left it invested without interruption.

In its report, Fidelity highlighted the issue. And it noted that 6,000 of the 26,000 401(k)s for which it serves as record keeper now have an auto-portability feature, which provides an automatic rollover service for those with small balances.

That kind of feature may become more common in the years ahead. To date, 6% of all plans have already implemented it or will do so soon, and nearly 26% are considering it, according to the Plan Sponsor Council of America.

Making it easier to move small 401(k) balances from one plan to another throughout your career can pay off in the long term.

If auto-portability were adopted widely, it could preserve an estimated $1.6 trillion in additional retirement savings over 40 years, including $744 billion for 98 million minority job-changers, according to the Portability Services Network, a consortium of leading workplace retirement plan record keepers like Fidelity, Vanguard, TIAA and Alight as well as the Retirement Clearinghouse.

It was set up to help “under-served and under-saved workers” improve their retirement outcomes.

 

[Parliament 14593]

[UT_OB1 2266]

I turn 42 in a week. I finally hit $600k in my 401k this year. Growing up and just out of college I would have been ecstatic. I thought about 1mil would be plenty to retire on just drawing the interest.  Everything seems so expensive now I’m not sure I can ever retire. 

[Parliament 14593]

The Surly 1% say your first million is way harder than the rest.  God I hope so.

[Firemans4Horn 18528]

1 hour ago, UT_OB1 said:

I turn 42 in a week. I finally hit $600k in my 401k this year. Growing up and just out of college I would have been ecstatic. I thought about 1mil would be plenty to retire on just drawing the interest.  Everything seems so expensive now I’m not sure I can ever retire. 

Congrats! That’s a great balance for age 42 (I work in the industry). 
 

If you put $15k away a year with no employer match and got a 7% return on average you’d have $2.9mn at age 62. 8% return would be $3.5mn at age 62.
 

[StassneyHorn 6766]

1 hour ago, UT_OB1 said:

I turn 42 in a week. I finally hit $600k in my 401k this year. Growing up and just out of college I would have been ecstatic. I thought about 1mil would be plenty to retire on just drawing the interest.  Everything seems so expensive now I’m not sure I can ever retire. 

Is your house payed off? Worried about kids not leaving the house?

[UT_OB1 2266]

House not paid off. Kids are just 9 and 12 so that doesn’t even seem possible in my head, but I know it will be here faster than I want. Still college after that, and we haven’t been to start saving at all. 

Probably my biggest fear is my wife’s meds/health. She has medicine that is $25k a month. She has to have it. Employer insurance covers it for now, but it’s a fight every time the company switches providers. She had to fly to see another doctor one time to get it approved again. The coupon drops the price all the way to $20k a month. Htf do they expect people to survive with those prices?

 

*I did not kill any ceos this week*

[Parliament 14593]

11 hours ago, UT_OB1 said:

 

 

*I did not kill any ceos this week*

*yet

[RDCanecutter 26871]

15 hours ago, UT_OB1 said:

House not paid off. Kids are just 9 and 12 so that doesn’t even seem possible in my head, but I know it will be here faster than I want. Still college after that, and we haven’t been to start saving at all. 

Probably my biggest fear is my wife’s meds/health. She has medicine that is $25k a month. She has to have it. Employer insurance covers it for now, but it’s a fight every time the company switches providers. She had to fly to see another doctor one time to get it approved again. The coupon drops the price all the way to $20k a month. Htf do they expect people to survive with those prices?

 

*I did not kill any ceos this week*

You're gonna make it, man. The fact that you've put 600K away even with 300k/annual medical bills tells me you've got some hill-climbing gears in that transmission. Good for you.

[UT_OB1 2266]

5 hours ago, Parliament said:

*yet

[horn4life 3838]

1) Max 401K, then Max HSA, then look at Roth.  First two are pretax.  And you can take both with you if fired. 

2) If you sold stock and have capital gains, then look at selling any loser stocks to offset those cap gains.

3) Review all your insurance, bank and brokerage accounts to make sure you have correct beneficiaries in place in case of your demise.

4) Take $100 and carry it around between now and the end of the year.  And give it away to somebody, for any reason you deem.  You will know the right moment, and it will make you feel really good inside.

 

 

[RDCanecutter 26871]

10 hours ago, horn4life said:

4) Take $100 and carry it around between now and the end of the year.  And give it away to somebody, for any reason you deem.  You will know the right moment, and it will make you feel really good inside.

Y'know, it HAS been forever since I visited a Scrip Club...

[Parliament 14593]

10 hours ago, horn4life said:

1) Max 401K, then Max HSA, then look at Roth.  First two are pretax.  And you can take both with you if fired. 

Why pretax?

10 hours ago, horn4life said:

2) If you sold stock and have capital gains, then look at selling any loser stocks to offset those cap gains.

This is Surly.  We don't lose.

10 hours ago, horn4life said:

4) Take $100 and carry it around between now and the end of the year.  And give it away to somebody, for any reason you deem.  You will know the right moment, and it will make you feel really good inside.

I PM'd you my address thx.

[StassneyHorn 6766]

Reminder, one last paycheck for the year to hit your limits.

[Nice Guy Eddie 13725]

As someone quickly approaching old guy status, one change I wish I had done as a younger person was to push the 401k limits at work. I could have found a way to live on 1-2 percent less. Pack a few more lunches to work. It would have made a difference 25 years later.

[bborange 10383]

 

[Parliament 14593]

3 hours ago, Nice Guy Eddie said:

As someone quickly approaching old guy status, one change I wish I had done as a younger person was to push the 401k limits at work. I could have found a way to live on 1-2 percent less. Pack a few more lunches to work. It would have made a difference 25 years later.

Every time you get a raise, bump your withholding the same amount.  Your yearly bonus goes into your ROTH IRA.  Just do it.