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Old 05-01-2012, 11:08 AM   #21
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NOLA is picking up big time my friend...GE coming in with an office, google is strongly rumoured, tons of entreprenuership, etc.

$10k is before tax and after match. We're above the income limit for Roth IRA.
I am certainly happy for the city. It is a grand place to visit. It was horrible living there, IMHO.

There really isn't a cap on roth IRA contributions. The government should remove it.

Why not max your 401k and start taxable savings?
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Old 05-01-2012, 11:13 AM   #22
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Gotcha.

Thoughts on putting all money towards mortgage vs. splitting up b/w mortgage and more liquid taxable accounts?
No right or wrong answer here. Matter of personal preference. I think you have "enough" liquid cash to paydown the mortgage agressively. Of course I say this because I am current making double payments on my own mortgage and will be totally debt free by August (paid off a 15 year in 5 years). So when I recommend this approach I am probably trying to validate my own decision making. Likewise, I am sure very reasonable minded people will tell you to build up your liquid accounts due to the low interest rates on your debt because that is what they are doing.
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Old 05-01-2012, 11:17 AM   #23
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I say build up the liquid accounts. You should have a very low interest rate on the mortage so I would not be in a hurry to get rid of it. Besides, if you taxable accounts do well, you might very well be able to pay the mortgage off in the not too distant future. Cash is king........
+1. Your mortgage at 4% is not a serious problem. Build up lots more money in the taxable accounts so that you have flexibilty if your job goes away or requires a move to someplace you do not want to go. If I was in your situation, which by the way looks very good I would be thinking about paying off the mortage after you have a couple years of flexible assets. You can go hard at paying off the mortgage over the period of 5 to 10 years from now.
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Old 05-01-2012, 11:18 AM   #24
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Hello, Tiger Fan, and welcome to the Early Retirement Forum! Good to see another New Orleanian here. I hope you enjoy posting on the forum. I agree that our recovery has been encouraging lately.

I retired in 2009, and it has been great.
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Old 05-01-2012, 11:23 AM   #25
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Gotcha.

Thoughts on putting all money towards mortgage vs. splitting up b/w mortgage and more liquid taxable accounts?
As skyvue said, it's a matter of personal preference. For years, I paid the minimum required on my mortgage and focused exclusively on building my taxable accounts. I only paid off the mortgage after becoming financially independent. For some people, paying the mortgage as quickly as possible is psychologically rewarding and I do understand that. Nonetheless, I think it is important to maintain a proper amount of liquidity and I find your emergency fund/liquid savings to be a bit light at present.
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Old 05-01-2012, 11:25 AM   #26
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Having paid for 4 years of my kids' college--against good advice here--I will advise you to ensure that they take a large responsibility for their own education. Make SURE they learn how to work. I went through on the GI bill. They can go to one of five service academies and get paid to do so and have a job when they come out. If they work in a golf club, they are eligible for a full-boat scholarship. There are co-op programs many places. Send them there. And many odds-and-ends scholarships. If your small business works out, you can hire them and pump money into their Roths. Some businesses contribute to a worker's college education (McDonalds?).
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Old 05-01-2012, 12:39 PM   #27
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I want to clarify something about 529's.
While the kids are listed as beneficiaries, they are NOT owned by the kids. So they do not count against the kids financial aid prospects anymore than any other asset held by the parent. They are kind of like a ROTH IRA for college expenses - you extract the money tax free (no cap gains). This is a tax advantage for the parent.

For me - 529's work because I will not have the income to just pay as the kids go - I'm already 50, hoping to retire in 2-3 years, and the kids are only in 3rd and 5th grade... You're younger, if your business is successful, you will have the bandwidth to pay for their college as they attend.

I've seen a couple references to 529's hurting a kids chance for financial aid compared to the parent saving in a taxable account - I wanted to correct that. The kids do not own the 529's... the parents do - and it's calculated that way.

(I also agree with the comments that kids should have some skin in the game for paying for college - that factors into the amount you save.)
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Old 05-01-2012, 12:55 PM   #28
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I want to clarify something about 529's.
While the kids are listed as beneficiaries, they are NOT owned by the kids. So they do not count against the kids financial aid prospects anymore than any other asset held by the parent. They are kind of like a ROTH IRA for college expenses - you extract the money tax free (no cap gains). This is a tax advantage for the parent.

I've seen a couple references to 529's hurting a kids chance for financial aid compared to the parent saving in a taxable account - I wanted to correct that.
While this is true for federal financial aid (FAFSA), it might be not true for a particular school. They make their own rules and there are schools which will adjust the amount of financial aid based on the total value of 529s, where the student is beneficiary (this is also done to include grandparents 529s, which are invisible to FAFSA) more than 5.64% factor used for parental assets by the feds.
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Old 05-01-2012, 01:17 PM   #29
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While this is true for federal financial aid (FAFSA), it might be not true for a particular school. They make their own rules and there are schools which will adjust the amount of financial aid based on the total value of 529s, where the student is beneficiary (this is also done to include grandparents 529s, which are invisible to FAFSA) more than 5.64% factor used for parental assets by the feds.
Well, heck, you could always change the beneficiary to yourself until after they apply for the aid, and then change it back tot he kid.........not that that's ever been done..........
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Old 05-01-2012, 01:35 PM   #30
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Well, heck, you could always change the beneficiary to yourself until after they apply for the aid, and then change it back tot he kid.........not that that's ever been done..........
Love it.
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Old 05-01-2012, 02:34 PM   #31
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Sorry, can see where that needed some clarification...it won't let me edit the OP right now...but you can see the detail in teh post directly above this one. Actual expenses are ~$69k.

thanks for the feedback on 529...I think I feel the same way
I think I see your situation better. Your expenses are a lot more reasonable that it appeared from your OP.

Since you are in a high tax bracket and have a lot of disposable income, I would suggest that you maximize your 401ks (and HSAs if you have them), consider back-door Roth contributions if you don't have any pre-tax IRAs, and then taxable savings.
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Old 05-02-2012, 10:32 AM   #32
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$8150 - Food
$7090 - True Discrecionary (Entertainment, Clothes, Vacations, etc)

$6450 - Utilities ( alarm, Electric, Gas, Internet, Water/Sewer)
$2550 - Gifts

These all seem very very high to me. $2550 in gifts? You spend more on gifts than you do on gasoline for two cars.
$540 per month in utilities? $22 per day in food? Actually the food one is not terrible, but you could probably still cut a bit out of there.

Anyways, I think you should try to cut down on your expenses. They seem insanely high for 2 adults and 2 young kids.

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Old 05-02-2012, 10:56 AM   #33
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Love it.
Not illegal, AFAIK, but there's always the morality question.......
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Old 05-02-2012, 06:34 PM   #34
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Slightly off topic, but I have a child at LSU. Full scholarship for everything except housing. For most parents who actually have a job and generate the money that pays for the military, roads, etc., you also have the privilege of NOT getting any need based aid. Only merit based aid for you, little hard working grasshopper. So the financial pea and shell game doesn't seem to work (IMHO). I realized a long time back that a state university and 529's were the best financial decision for our family. 529's are very flexible. Even have one for myself (you know, for when I retire and take cooking and history classes).
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Old 05-04-2012, 07:50 PM   #35
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To nitpick, your utilities seem very high to me. Usually heating your home is the primary culprit but since you live in NOLA I would think that would be minimal. I am guessing electric bill to cool it is the biggest factor?

Assuming those are fixed and you can't do anything, I would then look for way to cut on the Food. I feel like I eat well and buy healthy food but spent less than $3,000 last year as a single person without event trying to skimp, cut coupons, etc.....may be some room to squeeze out $1,500 per year on that line item. Nothing else looks out of whack to me on the surface though. I think you have a good plan/approach. I personally would pay off the student loans despite the low interest rates but many would disagree. I hate debt of any type and physically feel better without it.
Utilities
I include cable and internet in there ($150)..that and the fact new orleans absolutely rapes you on water/sewerage ($150/month...but I have a huge empty lot that I have to water). I'm getting some plumbing reworked and another line put in, which should save be about $75/month in water.

Food
This is our first year of our twins eating "real (non forumla) food)...so I likely was a little conservative on that part of the budget. We allow ourselves $100/month each to eat out at lunch and another $100/month for family dinners out.

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Hello, Tiger Fan, and welcome to the Early Retirement Forum! Good to see another New Orleanian here. I hope you enjoy posting on the forum. I agree that our recovery has been encouraging lately.

I retired in 2009, and it has been great.



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Slightly off topic, but I have a child at LSU. Full scholarship for everything except housing. For most parents who actually have a job and generate the money that pays for the military, roads, etc., you also have the privilege of NOT getting any need based aid. Only merit based aid for you, little hard working grasshopper. So the financial pea and shell game doesn't seem to work (IMHO). I realized a long time back that a state university and 529's were the best financial decision for our family. 529's are very flexible. Even have one for myself (you know, for when I retire and take cooking and history classes).
Were your 529s "over funded"? What did you do with the left over money?


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These all seem very very high to me. $2550 in gifts? You spend more on gifts than you do on gasoline for two cars.
$540 per month in utilities? $22 per day in food? Actually the food one is not terrible, but you could probably still cut a bit out of there.

Anyways, I think you should try to cut down on your expenses. They seem insanely high for 2 adults and 2 young kids.

Yeah, the gifts is a lot. We both have big families and a large network of friends, so when you add together all of the birthday parties, mother's day, father's day, every other holiday, weddings, etc... it adds up quick....and we try to be as conservative as possible on the gifts.

Re: True Discrecionary (Entertainment, Clothes, Vacations, etc) $7,090 - so I guess maybe this could be a lot...and surely we can cut it b/c it is just "discretionary"...but at what risk/reward? Is the thought here just to live as cheap as possible? I'm not being defensive at all (I know it could sometimes read that way)...but just more curious than anything.
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Old 05-04-2012, 08:17 PM   #36
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I say build up the liquid accounts. You should have a very low interest rate on the mortage so I would not be in a hurry to get rid of it. Besides, if you taxable accounts do well, you might very well be able to pay the mortgage off in the not too distant future. Cash is king........
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Originally Posted by EvrClrx311 View Post
+1 took the words right out of my mouth. Paying off the mortgage is a great feeling, but this early in your career and with a two income family there are better places to apply those funds (like building a taxable account). At the low rates we're seeing today, paying down the mortgage is essentially locking your money into a 2-3% growth rate that can be difficult to access later if you need it... selling the house... or taking a HELOC at likely a much higher rate than what we're seeing right now.
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Originally Posted by ronocnikral View Post
I am certainly happy for the city. It is a grand place to visit. It was horrible living there, IMHO.

There really isn't a cap on roth IRA contributions. The government should remove it.

Why not max your 401k and start taxable savings?
Quote:
Originally Posted by skyvue View Post
No right or wrong answer here. Matter of personal preference. I think you have "enough" liquid cash to paydown the mortgage agressively. Of course I say this because I am current making double payments on my own mortgage and will be totally debt free by August (paid off a 15 year in 5 years). So when I recommend this approach I am probably trying to validate my own decision making. Likewise, I am sure very reasonable minded people will tell you to build up your liquid accounts due to the low interest rates on your debt because that is what they are doing.
Quote:
Originally Posted by jclarksnakes View Post
+1. Your mortgage at 4% is not a serious problem. Build up lots more money in the taxable accounts so that you have flexibilty if your job goes away or requires a move to someplace you do not want to go. If I was in your situation, which by the way looks very good I would be thinking about paying off the mortage after you have a couple years of flexible assets. You can go hard at paying off the mortgage over the period of 5 to 10 years from now.
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Originally Posted by FIREd View Post
As skyvue said, it's a matter of personal preference. For years, I paid the minimum required on my mortgage and focused exclusively on building my taxable accounts. I only paid off the mortgage after becoming financially independent. For some people, paying the mortgage as quickly as possible is psychologically rewarding and I do understand that. Nonetheless, I think it is important to maintain a proper amount of liquidity and I find your emergency fund/liquid savings to be a bit light at present.
Thanks for all the feedback re: savings vs. paying down mortgage. I understand that I'm in a great place with my mtg. rate. My biggest worry about taking extra cash and putting that in the market vs. paying down the mortgage is that I'll get caught in a down market when I actually need the cash.

This assumes that "taxable accounts" means some sort of liquid account for stock. If it's something else, I'm all ears.
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Old 05-07-2012, 08:27 AM   #37
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Utilities
Re: True Discrecionary (Entertainment, Clothes, Vacations, etc) $7,090 - so I guess maybe this could be a lot...and surely we can cut it b/c it is just "discretionary"...but at what risk/reward? Is the thought here just to live as cheap as possible? I'm not being defensive at all (I know it could sometimes read that way)...but just more curious than anything.
The reward is that you save $5000 more a year which allows you to retire a few years earlier.

Instead of flying somewhere for a vacation, drive somewhere. Instead of going out to a show for entertainment, rent a movie.
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