Plan for Exit 2024

[Exit 2024]

On top of our results wanted to share some revelation of mine, that I got after looking at our year end paychecks.

I was trying to compare 2015 to 2014 in gross income and as expected we earned together $16k more - great!!!

But then I looked at how much taxes were taken out - and here was my revelation - $16k more then last year

How that even possible?
Did I miscalculate our withholding by that much ?
Did I miss something very important?
I knew our tax bill will increase due to HCE limits on 401k contributions but did not expect 100% marginal tax rate

After quick and dirty spreadsheet number-crunching here is what happened:
we earned $16k more and also contributed $24k less to 401k in 2015 - total taxable income increased by $40k, our marginal tax rate including federal, state, local and partial FICA is very close to 40%, and that 40% on $40k is indeed $16k extra in overall the tax bill

Now I am looking to buy 2015 tax software to get to more accurate figures, it may not look so bad if we get some refunds but I do not expect much anyways

[2017ish]

Exit, that result sounds quite likely.

Time to lobby employer(s) for a safeharbor plan so that HCE/anti-discrimination testing doesn't hit you... Both of us have always been in safeharbored plans, which has been a lifesaver.

[Exit 2024]

Quote:

Originally Posted by 2017ish Exit, that result sounds quite likely. Time to lobby employer(s) for a safeharbor plan so that HCE/anti-discrimination testing doesn't hit you... Both of us have always been in safeharbored plans, which has been a lifesaver.

2017ish, I am all for safe harbor lobbying but my employer for example have low 401k participation rate and 50k employees, I think implementing it will cost them quite a bit of change.
do I understand it correctly that employer will need to make non-elective contribution to all?

[Katiek]

Thanks for the update and congrats on your progress!

[2017ish]

Quote:

Originally Posted by Exit 2024 2017ish, I am all for safe harbor lobbying but my employer for example have low 401k participation rate and 50k employees, I think implementing it will cost them quite a bit of change. do I understand it correctly that employer will need to make non-elective contribution to all?

That is one option (3% to all eligible employees). Employer can also make a 4% matching on everyone who participates. Both are immediately vested. The linked website from which I take the following quote does a good job of explaining:

Quote:

Q: What is required from me, the employer? A: Employers may choose between two Safe Harbor contribution options. These accounts are 100% vested and must be funded on a per-pay-period basis. An employer matching contribution of 100% of employee elective contributions (both pre-tax and Roth) on the first 4%, 5%, or 6% of compensation, OR An employer non-elective contribution of 3% of compensation for all eligible employees.

https://www.sharebuilder401k.com/safe-harbor.aspx

Given your situation, I suspect that the 100% match (up to 4% comp.) for all employees would be the most cost effective for your employer. But, my experience has been with much smaller entities, and the plan for which I was a trustee/fiduciary went the other way to ensure that everyone had at least something in their retirement pot....

[Exit 2024]

2017ish, appreciate info and the link, will be educating myself on safe harbor rules

[Exit 2024]

Finally Q1 is over- posting update on our progress

If not for March improvements in the market - we would be very red for that quarter. January NW was down by a lot, and February was flat
March came and our daughter's 16 y.o. car started to fall apart to the point where repairs did not make any sense and to drive it became unsafe
We were really hoping that it will survive through her college years, but it did not had to go and buy new used car that set us back $14k in cash - now that one should last till end of the college and then some - till she pays majority of her student loans back. Despite that expense we still did pretty good in March and our NW not only recovered from January-February lows but also got to the new high

33 Q to go...

[Exit 2024]

Q2 was a wild ride, I was 200% sure that it will be quarter with negative net worth growth for us. Not only investment was doing nothing for first 2 months but then Brexit vote happened
In addition management of the condo that we own sent a bill for almost $5k for emergency assessment, they have been doing repairs and found massive water damage in the external walls that needs to be corrected ASAP
On top of that we covered medical bills for my father's treatments - unfortunately all was ineffective and he passed away I am heartbroken and motivated as never to FIRE and enjoy my life while we still have our health.

After all of the above to my amusement we closed Q2 with positive NW growth and made it to the new high, thanks to market rebound in last couple days of the June.
2 comma club looks like in the reach unless we will have more Brexit like event shortly.

32Q' to go...

[kaudrey]

My condolences on the loss of your father, Exit.

[Katiek]

My condolences on the loss of your Dad, but glad you were able to help him financially. Sometimes FIRE isn't about retiring early, but about being able to make sure you've pursued all options to help the ones you love.

[Golden sunsets]

Sorry for your loss.

Some additional questions for you to help round out the picture.

Are you a DIYer with your investments?
Are you an indexer?
What is your asset allocation?
Do you have the lowest possible expense ratios in your holdings?

We have financial information going all the way back to 1991 and I've always noticed that the growth in NW goes in spurts. So keep up the good work and focus on the expense side as much as the asset side. Knowing where every penny goes is a good motivator to keep expenses as low as possible. Once your DD is launched you should be in great shape to supercharge your accumulation.

[Exit 2024]

Katiek, you can not be more right. I would gladly pay 10 times more to give my father couple more years of quality life, unfortunately money can buy a lot of things but still can not buy health. What bothers me the most that he retired just 2 years ago and was really looking forward to spend a lot of time at lake house with kids and grand kids, but instead spent those 2 years fighting for his life. That really moved FIRE to the top on my list - perspective, perspective ....

[Exit 2024]

Golden sunsets, thanks for the questions.

Short answer is yes, we are DIY investors and following Jack Bogle advise.
Have been targeting 70/30 stocks/bonds allocation but slowly moving into 60/40 right now - will look at that more closely in couple years again.
Most of our investments are in Vanguard funds, exceptions are 401ks, where no Vanguard funds offered although we still invested only in index funds there. We also have some dividend paying stocks in taxable from early years of investing but can not move those to indexes as we have large capital gains. That will be done as soon as we out of the work force.
I never calculated our overall expense ratio, will put it on my list to do. Thanks for the pointer.

[Exit 2024]

Quicken posted second comma on the bottom of the screen today for the first time ever, 4 days before my 47th birthday
hope it holds till Tuesday though

[gauss]

Congratulations -- I had my leading digit increment when I checked balances for the first time in a year.

It made me want to do a happy dance -- but then Brexit vote happened then next day or so.....

[Exit 2024]

gauss, I hear you, pretty sure that we will cross this level multiple times in both directions but today we will celebrate a little

[Exit 2024]

This year continue to be a very tough one for us, after loosing my father in July, my mother in law suddenly passed away at the end of September. Now we are praying to get to the end of year with no more losses.

On financial front Q3 was not that bad, we are still holding up in two comma club and even added about 1.3% of target to our net worth looking to pay off all RE in next 6 month and then question will become where to invest next.

Currently we are investigating 2 options: to get rental RE or start to invest heavily in taxable account. Both have it's pros and cons, so we are trying to figure out what best way to proceed.
I also have some questions to ask, but will post those in coming days.

Here is our Q3 numbers, I split out investable assets to track that subtotal also.
31Qs to go...

[Exit 2024]

Q4 and end of the year results:
--reached 2-comma club and still staying there
--almost done with paying off all RE, both mortgages are closed, have a little bit left on HELOC that we should be able to pay off in Q1
--ended 2016 with 35.6% of targeted FIRE net worth
--saved less this year than last one ($81k vs $108k) due to some big one time expenses

Plans for 2017:
-- due to timing of my RSU vesting I expect to have 401k HCE contribution limit to be removed for me for 2017, will be maxing out it this year
-- looking to buy rental RE if will find good deal
-- start active taxable investment
-- want to reach $1.25 mil by end of 2017

30Qs to go...

[Standard Staples]

Tremendous progress. With the mortgages paid off, your savings should grow at a faster clip in 2017. $1.25M is easily within reach! I'll keep an eye on your quarterly updates.

[Exit 2024]

Thanks, Staples same here- subscribed to your topic to follow your updates and progress