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25, 87K networth.What to do with 65K in cash? Need a plan!
Old 02-20-2020, 09:26 PM   #1
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25, 87K networth.What to do with 65K in cash? Need a plan!

Thanks in advance!!

25, Single Filing Status, Graduate Student (fellowship income until May 2020), 0 dependents, US Citizen, Living in the Midwest

Would like to reach FI by age 35, but realize it may be later you never know where life will lead. In any case, the FI/RE lifestyle is something I always strive for. Hoping for first 100K by 2021!

I am currently attending graduate school for a masters to PhD in social work. Just finished the masters and early in the PhD process. Estimated graduation would be until May 2024 or May 2025…

As I consider my financial situation over the next few years, I realize as a grad student my income will be limited over the next few years, with it paying off in the future hopefully with good employment opportunities. Given that I hope to reach FI/RE, I also want to take into account whether, limiting my earning potential for various year will be worth it, if this will ultimately be helping me reach FI/RE over the longer term in contrast to leaving Now and earning a regular salary, saving even more, instead of studying all that time.

So those thoughts and considerations are taking place as I assess my situation and next steps. I am really looking to evaluate my current finances and develop my FI plan that I can use regardless of what I end up going with my education and the PhD. Anyways, this exercise may also help me worry less about my finances and feel okay with taking such a large pay cut while I get the PhD.

I am tired of getting vague advice from blogs and podcasts, or people who don’t get FI that do not speak about specific, technical and real strategies I can employ. So, I hope to get specific, tax optimized and useful information that is not something I could look up on any of the many FI blogs out there now. I have read many FI books over the past 2 years, so I feel that I have a good conceptual grasp on many basic FI things but it is when it comes to the small details and real world tasks of implementing FI strategies where I get lost. I really just need specific, practical advice of things I can do now to reach FI, and things I should consider in the near future.

Below I provide a comprehensive summary of my current situation and some future projections to answer many of the questions you may have thought as you read this. Please take a look!

Specific Questions:

Do I have too much saved in cash? If so, what should I consider doing with this money?

Should I be looking at asset allocation in terms of all of the accounts and money I have or just worry about allocation within each investment account?

How to you think about asset allocation between IRA, and brokerage accounts?

Should I invest more into the brokerage account?
And if so how should I allocate this. After some reading I have considered an 80/20 allocation but how could I reach this noting that bonds are not tax efficient enough to put in a taxable brokerage account?

Should I consider investing in other things beyond index funds like ETFs, REITs etc.?
...Have considered buying a rental property but being in a school makes it difficult to really take the time to look into that yet…

What should I consider as I go along my FI journey?!

Knowing what you know now, what would you do if you were in my situation?

My Current Financial Situation:

Gross Salary/Wages: $25,448 for 2019
Stipend
$2193.00/mo. Not-taxed until I file annual taxes
Part-time student position
$ 115.11/mo. Just stared 2 months ago
Other Income

Bank offers: average around $200-300, do not sign up for more than around 3 if they are worth it. Made $1,150 for 2019-2020 tax year, but do not expect to make that much this coming tax year since there will be banks I will not count as a new customer for…

Random favors for friends, dog sitting, or being a paid research participant. Not super significant amounts besides covering some take-out/groceries occasionally.

Savings:
Cash: $65,483.58
High Yield Savings Account $59,760.89
Checking Account(s) $5,772.69

Investments

Taxable brokerage account (Schwab): $15,175.10
Total Stock Index (SWTSX): $11,315.90
Total Int’l Stock Index (SWISX): $ 3,541.88
Dividends from 2019 $ 317.32
*Currently dividends are not automatically reinvested, I don’t know if I should do that or not. Should I automatically reinvest dividends?*
*Will not count for capital gains until around April 2020, have not held any funds for a year or more.*

Total Liquid Assets: $80,658.68

Roth IRA: $6,986.59
Total Stock Index (SWTSX): $ 5,418.56
Total Int’l Stock Index (SWISX): $ 398.05
US Bond Index Fund (SWAGX): $ 1,169.91
*Dividends reinvested automatically
Total Net worth: $87,645.24

*Was unable to contribute in 2019 because I was receiving fellowship income that does not qualify as “earned income”. Since SECURE act now allows students to invest fellowship income that did not qualify previously I plan to make full lump-sum contribution of $6000 this year from portion of money in savings account, unless persuaded that dollar cost averaging would be better…Will use as an opportunity to re-allocate based on the plan I will develop based on advice from this forum…*

State Pension Plan: was made available after starting part time position
$32.24 (only contribute enough to get match)

Adjusted Gross Income
$29,727 for Jan2019-Dec2019

Debts/Liabilities
$0

Fellowship covers tuition, Graduate Research Assistant/Teaching position in future years will cover tuition for remainder of PhD. Do not have any debt from previous undergraduate degree 

Taxes:
Will owe about $1, 500 for tax not with-held from stipend payments. Not eligible for many deductions or credits.

Current Expenses: Really just the basics, and travel to visit family twice a year…
Rent (apartment): $310/mo. $3720/yr, Utilities 521/yr, Groceries 560, Eating out 282, Going out 215, Misc 1734,

I do not own a car and use public transportation covered by my student fees which reduces expenses!

2019 Expenses totaled about $11,363

Was able to save about 62% of my income last year! $18,363

Future Income:

Projected salary after graduation with PhD
Avg. professor salary starting$65,000- 70K, Tenure positions/ Leadership positions as dean or
provost (after many years (like 10yrs) of experience can go up to around 80-100K)

*As of now I see myself working as a professor or in administrative role in higher education.

Projected salary if I leave PhD program with masters only
Around 40 to 50K rough estimates

Assuming I stay in PhD program I would have a Graduate Research Position starting August 2020:

About 1930/mo. (Before taxes) $23,160/yr before taxes…

Future Expenses possibly:

Car: maybe not until I graduate, and find a job. Would buy used, and spend only enough to buy a decent car maybe around 7-12K

House: If I decided to use it as a rental property; average house in my area is around 200K for a decent place would put down 15-20% to lower interest rates.
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Old 02-20-2020, 09:49 PM   #2
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Well your a student so you cant have enough cash I guess however to get to FI by 35 with those salary numbers I think you have a lot of work to do. I think your chosen career path is gonna need a lot of side hustles to get you there. The ROE on that type of education doesnt seem to be there for me. But thats me.
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Old 02-20-2020, 10:27 PM   #3
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PhD - Poor Hungry Doctor.
I have one myself, but in engineering. Ive been able to lead more interesting projects with a PhD vs. M.Sc. degree. However, I am most likely behind my peers who started working five years before me.

Id advise you to only go for the PhD if it enables you to do something not attainable with only a masters, such as being a professor. It will most likely put you way behind your target of FI in ten years.

The salary for this career does not lend itself to a quick FI, but there are two sides to the equation. Income and expenses-focus on staying on a grad student salary and you can get there.

Good luck and congratulations on getting this far at a very young age.
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Old 02-20-2020, 10:48 PM   #4
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Wow! Lots of detail but you are doing great.

Since you want to FI young, you should be wholly in equities.... Total Stock and Total International Stock are great funds and cover a lot of ground. At your age, I wouldn't bother with bonds or fixed income other than perhaps an online savings account for liquidity/emergencies.... but only if you really want to... we never had an emergency fund... credit cards can handle most emergencies and then just sell taxable account investment if needed to pay the credit card bill before it is overdue.

100% equities also solves the AA question that you had and the tax-efficient placement question that you have.... and keeps things simple for now. But answer your questions, it is best to look at your AA across all your holdings, and invest fixed income in tax-deferred account and equities in taxable and tax-free accounts.

Given that we are testing market highs (or at least before today we were), I would suggest that you get in via value averaging. So, for example, let's say that you want to put your $60k of high-yield savings to work over the next 6 months. Your taxable brokerage account currently has $15k in it... tomorrow, add whatever you need to to buy SWTSX to bring the balance to $25k... a month from tomorrow, add whatever you need to to bring the balance to $35k... repeat until the $60k of cash is invested. Change it up adding to SWISX as needed. Overall, you'll invest more when the market is relatively low and less when the market is relatively high.

The other thing that you should check into is the retirement savers tax credit.... I'm not sure if you would qualify but it should only take you 5-10 minutes to find out and if you do qualify you would get a tax credit (not a deduction, but a credit) for 10% to 50% of your retirement contributions. If not 2019, then perhaps 2020.

Also, keep in mind, since your taxable account is equities and your taxable income is under $40k, all qualified dividends and long-term capital gains are not taxed (0% rate) so that is even better than a Roth for now because it is tax-free but there are no restrictions like a Roth.

Finally, if you don't already have it, buy Quicken. You can use the Lifetime Planner included in Quicken Deluxe and higher to plot your course... and then use Quicken to monitor your progress.
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Old 02-20-2020, 11:08 PM   #5
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Congrats! You are doing great so far financially. As mentioned already I think you need to be more aggressive with you money because you have the gift of time on your side. Buying some good index mutual funds will really have time to grow in your future. Id split up whatever you want to invest by six and invest equally every month over the next six months. And please pay attention to expenses for whatever investment options you consider.

The caveat for the above advice is what is your plan for that money? Would you be interested in buying a car in a few years? If so Id consider setting aside some of that cash for that purchase.

What about a home purchase down the road. How and where to put money for a down payment depends on how soon you think you might want to make a home purchase.

Otherwise Id invest nearly all of it in equities because of your age unless your risk tolerance is low. Consider keeping about six months worth of living expenses in cash for an emergency fund and let the rest grow in the market. And as long as you have earned income keep taking advantage of the tax advantaged accounts that are available to you.

Find out what your goals are for this cash and what the timetable is for those goals and then allocate the money accordingly. Answering those questions coupled with your own risk tolerance will guide you to the logical choices for how to deploy this cash to work most efficiently towards your financial future.

Good luck! I hope this helps!
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Old 02-20-2020, 11:33 PM   #6
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Steve Martin said it best. You can be a millionaire and never pay taxes...first get a million dollars

https://youtu.be/T28ouCAUl4w

The secret to FI really early is to make a lot of money really early. typically that is engineering in the high tech field, or catch a lightning bolt on a Facebook type stock early or something like that.

The rest of us schlubs grind it out day after day enjoying our life as it is...while waiting for the stock market to do it's thing over decades

YMMV
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Old 02-21-2020, 12:51 AM   #7
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When I see that you are 25 and plan to graduate at 29-30, and then retire at 35. I see you are planning to work for 9-10 years for 5 years of pay, and not even exceptional pay.

What is the NW that you're shooting for? I think that is the number you need to focus on.

35 years old is a mental goal, but you need to achieve a certain NW. If working a few years longer improves your standard of living for the "rest of your life", you'll feel foolish if you decide to retire a little too early.

Investments tend to snowball after a certain level. You need to reach a level that your investments will continue accumulating after you stop working.

Teaching isn't considered a particularly stressful career. What's the rush to retire before you have a healthy nest egg?
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Old 02-21-2020, 05:20 AM   #8
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Ignore the negativity. It's great that you have a challenging goal. Go for it, it won't happen unless you try.

Now, considering the numbers and info you've provided, it will be a stretch. But there's nothing that dictates that you can't do it. Work hard, save prudently/judiciously, and look for a partner who shares your aspirations. It's certainly easier with two incomes with like-minded individuals.

Anyhow, as a student, the income and expenses you've described, I do believe you are carrying too much in cash. It certainly curtails the income that it will generate. There are plenty of funds/ETFs that will generate more than what cash generates at this time, and with relatively low risk. To be very conservative, keep two years expenses in cash - for you, that's about $23k.

That you can get along on $950/month is really great. If you continue that, even if you do not meet your ultimate objective within the time frame you are looking at, you will have saved and grown your net worth a significant amount. Because you have such a low level of expenses, what qualifies as FI for you would also be quite low should you keep that level of spending. Throwing off $12k a year at 4% comes to just $300,000, if we doubled that for $24k a year, still only $600k needed.

Now, as you get older, life happens. If you meet that right someone, you will very likely have more expenses. If you build a family, there's more expenses and financial responsibility. What you can count on is that if you continue on your current path, you will continually be making progress. Ultimately, maybe it doesn't happen by age 35, but you will certainly be close enough that it could be by age 40 or 45 at worst - still quite an achievement.

Quote:
Future Income:

Projected salary after graduation with PhD
Avg. professor salary starting$65,000- 70K, Tenure positions/ Leadership positions as dean or
provost (after many years (like 10yrs) of experience can go up to around 80-100K)
Keep in mind, faculty positions generally come with a good pension and additionally tuition benefits for your kids should they attend that school or others within the same system. You should be considering these when you contemplate/discuss future income as they can each have a very dramatic impact on your situation.
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Old 02-21-2020, 09:23 AM   #9
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Quote:
Originally Posted by letsdothis View Post
Would like to reach FI by age 35, but realize it may be later you never know where life will lead. In any case, the FI/RE lifestyle is something I always strive for. Hoping for first 100K by 2021!
I realize that 35 is unrealistic, it is more of an arbitrary number to keep me motivated, I apologize for not being clear. Does anyone know how to edit an original post?


*Okay, so if I slowly invest what I have in cash, would I just keep the same to funds that I have in the brokerage? Would 75% Total stck index and 25% Int Index work??
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Old 02-21-2020, 09:39 AM   #10
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Quote:
Originally Posted by NgineER View Post
PhD - Poor Hungry Doctor.
I have one myself, but in engineering. Ive been able to lead more interesting projects with a PhD vs. M.Sc. degree. However, I am most likely behind my peers who started working five years before me.

Id advise you to only go for the PhD if it enables you to do something not attainable with only a masters, such as being a professor. It will most likely put you way behind your target of FI in ten years.

The salary for this career does not lend itself to a quick FI, but there are two sides to the equation. Income and expenses-focus on staying on a grad student salary and you can get there.

Good luck and congratulations on getting this far at a very young age.
Yes. You make good points. I will take those things into consideration. I think I am doing well in terms of savings but will have to work on the income side of things.
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Old 02-21-2020, 09:42 AM   #11
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Quote:
Originally Posted by RxMan View Post
Congrats! You are doing great so far financially. As mentioned already I think you need to be more aggressive with you money because you have the gift of time on your side. Buying some good index mutual funds will really have time to grow in your future. Id split up whatever you want to invest by six and invest equally every month over the next six months. And please pay attention to expenses for whatever investment options you consider.

The caveat for the above advice is what is your plan for that money? Would you be interested in buying a car in a few years? If so Id consider setting aside some of that cash for that purchase.

What about a home purchase down the road. How and where to put money for a down payment depends on how soon you think you might want to make a home purchase.

Otherwise Id invest nearly all of it in equities because of your age unless your risk tolerance is low. Consider keeping about six months worth of living expenses in cash for an emergency fund and let the rest grow in the market. And as long as you have earned income keep taking advantage of the tax advantaged accounts that are available to you.

Find out what your goals are for this cash and what the timetable is for those goals and then allocate the money accordingly. Answering those questions coupled with your own risk tolerance will guide you to the logical choices for how to deploy this cash to work most efficiently towards your financial future.

Good luck! I hope this helps!
Okay, let's say I set aside about 10K and decide to invest the rest about 50K considering what I already have in the taxable brokerage account (about 15K, see original post) how should I invest this?
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Old 02-21-2020, 09:49 AM   #12
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Originally Posted by pb4uski View Post
Wow! Lots of detail but you are doing great.

Since you want to FI young, you should be wholly in equities.... Total Stock and Total International Stock are great funds and cover a lot of ground. At your age, I wouldn't bother with bonds or fixed income other than perhaps an online savings account for liquidity/emergencies.... but only if you really want to... we never had an emergency fund... credit cards can handle most emergencies and then just sell taxable account investment if needed to pay the credit card bill before it is overdue.

100% equities also solves the AA question that you had and the tax-efficient placement question that you have.... and keeps things simple for now. But answer your questions, it is best to look at your AA across all your holdings, and invest fixed income in tax-deferred account and equities in taxable and tax-free accounts.

Given that we are testing market highs (or at least before today we were), I would suggest that you get in via value averaging. So, for example, let's say that you want to put your $60k of high-yield savings to work over the next 6 months. Your taxable brokerage account currently has $15k in it... tomorrow, add whatever you need to to buy SWTSX to bring the balance to $25k... a month from tomorrow, add whatever you need to to bring the balance to $35k... repeat until the $60k of cash is invested. Change it up adding to SWISX as needed. Overall, you'll invest more when the market is relatively low and less when the market is relatively high.

The other thing that you should check into is the retirement savers tax credit.... I'm not sure if you would qualify but it should only take you 5-10 minutes to find out and if you do qualify you would get a tax credit (not a deduction, but a credit) for 10% to 50% of your retirement contributions. If not 2019, then perhaps 2020.

Also, keep in mind, since your taxable account is equities and your taxable income is under $40k, all qualified dividends and long-term capital gains are not taxed (0% rate) so that is even better than a Roth for now because it is tax-free but there are no restrictions like a Roth.

Finally, if you don't already have it, buy Quicken. You can use the Lifetime Planner included in Quicken Deluxe and higher to plot your course... and then use Quicken to monitor your progress.
Thank you for all of the great advice, this is the type of help I was looking for. Practical Advice. Unfortunately I am not eligible for the saver's credit since I did not contribute to a traditional IRA.

Okay, so would I just keep the same allocation of 75% in total stock market index, and 25% in international index in my taxable brokerage account?

Also for the Roth should I make the full 6k contribution? If so, should I keep contributing to the bond index I already have or what type of allocation should I keep in that account?
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Old 02-21-2020, 09:59 AM   #13
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Originally Posted by njhowie View Post
Ignore the negativity. It's great that you have a challenging goal. Go for it, it won't happen unless you try.

Now, considering the numbers and info you've provided, it will be a stretch. But there's nothing that dictates that you can't do it. Work hard, save prudently/judiciously, and look for a partner who shares your aspirations. It's certainly easier with two incomes with like-minded individuals.

Anyhow, as a student, the income and expenses you've described, I do believe you are carrying too much in cash. It certainly curtails the income that it will generate. There are plenty of funds/ETFs that will generate more than what cash generates at this time, and with relatively low risk. To be very conservative, keep two years expenses in cash - for you, that's about $23k.

That you can get along on $950/month is really great. If you continue that, even if you do not meet your ultimate objective within the time frame you are looking at, you will have saved and grown your net worth a significant amount. Because you have such a low level of expenses, what qualifies as FI for you would also be quite low should you keep that level of spending. Throwing off $12k a year at 4% comes to just $300,000, if we doubled that for $24k a year, still only $600k needed.

Now, as you get older, life happens. If you meet that right someone, you will very likely have more expenses. If you build a family, there's more expenses and financial responsibility. What you can count on is that if you continue on your current path, you will continually be making progress. Ultimately, maybe it doesn't happen by age 35, but you will certainly be close enough that it could be by age 40 or 45 at worst - still quite an achievement.


Keep in mind, faculty positions generally come with a good pension and additionally tuition benefits for your kids should they attend that school or others within the same system. You should be considering these when you contemplate/discuss future income as they can each have a very dramatic impact on your situation.
I appreciate your optimism. I know I have various shortcomings. But hey, only I know how many personal and social barriers I had to overcome to even get to this point! No one taught me about these things so I have had to learn a lot of this on my own. And when you are 18 picking a major you don't understand the implications!

Regardless I just need to figure out where to put the money I want to invest...after setting aside some for an emergency fund/near term expenses.
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Old 02-21-2020, 10:33 AM   #14
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OP, I would venture to bet that you are in a better position at 25 than most of the posters on here were at your age. I am 54 and you are so far ahead of where I was at 25. So that's one huge pat on the back. So much of FIRE is taking the first steps and having the mindset. You have that already. Regarding your allocation: I am not a big fan of having a large percentage in international. Reason being many/most of the SP500 companies have international exposure. I am only about 5% in specific international. Good luck and keep up the good work. Much of what you will get on here is a set of tools. How you use them is up to the individual. YRMV. (your results may vary)
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Old 02-21-2020, 10:43 AM   #15
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Quote:
Originally Posted by letsdothis View Post
Thank you for all of the great advice, this is the type of help I was looking for. Practical Advice. Unfortunately I am not eligible for the saver's credit since I did not contribute to a traditional IRA.

Okay, so would I just keep the same allocation of 75% in total stock market index, and 25% in international index in my taxable brokerage account?

Also for the Roth should I make the full 6k contribution? If so, should I keep contributing to the bond index I already have or what type of allocation should I keep in that account?
It is unclear... do you have earned income for 2019 such that you can contribute to a retirement account? If so, you have until the due date of your 2019 return... April 15th... to contribute to an IRA.

Are you a full-time student?.. If not and if you can make a contribution to a retirement account (tIRA or Roth IRA) then you can get the retirement savers credit. In some cases it is better to make tIRA contributions to lower your income to a higher crediting tier, and then a Roth for the rest.... my son has had years where he has done that to optimize his credit.

Yes, while in the example I made I had the investment money going into SWTSX to keep it simple (though you could later have just sold some SWTSX and bought SWTIX to rebalance), your idea of splitting purchases 75% SWTSX and 25% SWTIX is even better.

I think anytime you can contribute to a Roth that it is a good thing, because while now a taxable account at 0% tax may be just as good, once you are done your schooling and fully employed you'll be making more and the 0% preferenced income will go away and that income will be at 15%.

And finally, at 25 I'd sell the bond fund and reinvest in SWTSX and SWTIX... no need for bond funds for a 25 yo.

Quote:
You’re eligible for the saver’s credit if you are 18 or older, not a full-time student and not claimed as a dependent on another person’s tax return.

But that doesn’t necessarily mean you get it: You must also make a retirement plan or IRA account contribution, and fall under maximum adjusted gross income caps the IRS sets each year.

If your adjusted gross income is above any of these thresholds in 2019, you aren’t eligible for the saver’s credit:

$64,000 as a married joint filer
$48,000 as a head of household filer
$32,000 as any other filing status
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Old 02-21-2020, 11:02 AM   #16
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Originally Posted by pb4uski View Post
It is unclear... do you have earned income for 2019 such that you can contribute to a retirement account? If so, you have until the due date of your 2019 return... April 15th... to contribute to an IRA.

Are you a full-time student?.. If not and if you can make a contribution to a retirement account (tIRA or Roth IRA) then you can get the retirement savers credit. In some cases it is better to make tIRA contributions to lower your income to a higher crediting tier, and then a Roth for the rest.... my son has had years where he has done that to optimize his credit.

Yes, while in the example I made I had the investment money going into SWTSX to keep it simple (though you could later have just sold some SWTSX and bought SWTIX to rebalance), your idea of splitting purchases 75% SWTSX and 25% SWTIX is even better.

I think anytime you can contribute to a Roth that it is a good thing, because while now a taxable account at 0% tax may be just as good, once you are done your schooling and fully employed you'll be making more and the 0% preferenced income will go away and that income will be at 15%.

And finally, at 25 I'd sell the bond fund and reinvest in SWTSX and SWTIX... no need for bond funds for a 25 yo.
I am a full-time student and received a fellowship stipend that does not qualify as earned income. I will be starting another position in August that will qualify as earned income. Hence, a renewed ability to contribute in the Roth this tax year. This year, I may contribute some to a tIRA for tax optimization and the rest in the Roth, but will have to look into the details.

Oh yes, you make a good point about the change in tax liability after completing school. So that means that if I want to avoid that 15% tax, once I am getting close to graduating I should see if I can sell some of those stocks particularly if I am hoping to use the money for an upcoming expense. Or if not just accept the fact that it will be taxed at 15%. Correct?
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Old 02-21-2020, 11:05 AM   #17
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OP, I would venture to bet that you are in a better position at 25 than most of the posters on here were at your age. I am 54 and you are so far ahead of where I was at 25. So that's one huge pat on the back. So much of FIRE is taking the first steps and having the mindset. You have that already. Regarding your allocation: I am not a big fan of having a large percentage in international. Reason being many/most of the SP500 companies have international exposure. I am only about 5% in specific international. Good luck and keep up the good work. Much of what you will get on here is a set of tools. How you use them is up to the individual. YRMV. (your results may vary)
Thanks for the kind words! It is reassuring to know I am somewhat in the right spot. I will research a bit more about International stock allocation, 25% was just something I must have picked up in reading about it somewhere!
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Old 02-21-2020, 11:24 AM   #18
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.... Oh yes, you make a good point about the change in tax liability after completing school. So that means that if I want to avoid that 15% tax, once I am getting close to graduating I should see if I can sell some of those stocks particularly if I am hoping to use the money for an upcoming expense. Or if not just accept the fact that it will be taxed at 15%. Correct?
Or if the gain on selling doesn't push you over the $40k taxable income top of the 0% capital gains bracket (for 2020... that's $52.4k of income after considering the $12.4k standard deduction) you can sell the stock at a gain and immediately buy it back. While there are rules on wash sales that generate a loss, there are no restrictions on wash saies that result in a gain... what the manuever does is increase your basis for any future sales at $0 cost (ignoring any state income tax implications).
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Old 02-21-2020, 11:28 AM   #19
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I am a full-time student and received a fellowship stipend that does not qualify as earned income. I will be starting another position in August that will qualify as earned income. Hence, a renewed ability to contribute in the Roth this tax year. This year, I may contribute some to a tIRA for tax optimization and the rest in the Roth, but will have to look into the details. ...
It sounds like you will qualify to make retirement contributions and the retirement savers credit for 2020.
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Responses to your questions
Old 02-21-2020, 12:21 PM   #20
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Responses to your questions

I like your directness and the thoroughness of your post. Here are some responses below. I achieved FI at 43, I went to law school, I have experience here.

Do I have too much saved in cash? YES - The blogs are right you need an emergency fund of 3-6 months of expenses but then you need to invest. If so, what should I consider doing with this money? You are young you need to start focusing on the best total return you can get without having crazy risk.

Should I be looking at asset allocation in terms of all of the accounts and money I have or just worry about allocation within each investment account? You need to learn about different asset types and over time you need to worry about allocation among asset classes.

How to you think about asset allocation between IRA, and brokerage accounts? Roth IRA is a good thing - pile the money in it. The allocation is regarding the investments.

Should I invest more into the brokerage account?
And if so how should I allocate this. After some reading I have considered an 80/20 allocation but how could I reach this noting that bonds are not tax efficient enough to put in a taxable brokerage account?

Should I consider investing in other things beyond index funds like ETFs, REITs etc.? YES.
...Have considered buying a rental property but being in a school makes it difficult to really take the time to look into that yet YOU ARE BETTER OFF DOING SOMETHING LIKE RE CROWDFUNDING.

What should I consider as I go along my FI journey?! AVOID THE BIG EXPENSES (seems like you are doing so).

Knowing what you know now, what would you do if you were in my situation? Two things I did that were very beneficial while I went to graduate school. I got a full scholarshp so no student debt and I continued to work and make money while going to school. Seems like you are doing those things so good job.

There are a lot of investments you can consider. Look at financial samurai or firemountainjourney for some ideas beyond traditional stock funds.
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