Midlife crisis crossroads... any and all help and/or opinions appreciated

[Brains428]

Remember, you're technically supposed to report property you've stolen to the IRS. They would like to account for all income- whether gifted, grifted, or earned.

[F0017S0]

Gift or a loan? Income and expenses need to reported and so do gifts. Even loan forgiveness is taxable. It is a sizable sum.

Thanks for the digestible explanation; I knew that loan forgiveness is taxable as income, but in this era of near-zero rates, then to me a zero rate does not strike me as “unreasonable”.

[Tim]

Thanks for the digestible explanation; I knew that loan forgiveness is taxable as income, but in this era of near-zero rates, then to me a zero rate does not strike me as “unreasonable”.

IRS actually publishes acceptable rates,

https://www.irs.gov/applicable-federal-rates

These are not bank rates.

[F0017S0]

Anyways, back to the topic: well done, OP! You have a lot going for you, especially without the millstone of student loans, and the appreciation of your primary home.

Silly question: why not just keep things as they are after you sell the primary residence? You could “improve/update” the building on your plot of land, move there full time, while keeping your employment situation somewhat stable? This allows hubs to get out, scratch the itch of being in nature and traveling while keeping a solid home base.

[F0017S0]

IRS actually publishes acceptable rates,

https://www.irs.gov/applicable-federal-rates

These are not bank rates.

Roger, that. So I would guess their (the IRS’s) reasoning is that a zero percent family loan could be “abused”, so it’s necessary to charge a rate even if I could get the same money at zero (or lower than the AFR) from a bank? In other words, zero or near zero from the bank is okay because I can’t “abuse” the bank?

[altadoc]

Silly question: if no one is taking a deduction (i.e., the rate is zero), why would the IRS be all bent out of shape? Not a lawyer…

The interest' should' count as income for the parents who are loaning the funds. In this specific case, the parents are charging 0%. However, due to the IRS rules, because the minimum loan rate is (right now) shy of 2%, the parents should be paying taxes on income for that 2%, whether they are charging it to the daughter. So even if the parent's arent charging an adequate interest rate, the income will be assumed.

Will the IRS find out in this case? Probably not. Does it make it any less of a legal violation? Nope.

[Dogtor]

altadoc thanks for the info, I will look back over the loan documents from my parents and see what I can figure out.

[Tim]

Roger, that. So I would guess their (the IRS’s) reasoning is that a zero percent family loan could be “abused”, so it’s necessary to charge a rate even if I could get the same money at zero (or lower than the AFR) from a bank? In other words, zero or near zero from the bank is okay because I can’t “abuse” the bank?

What banks pay for deposits is different than what banks charge for loans.
Actually, what the government pays for Interest on deposits is different than the borrowing rates.
Think deposit and borrowing rates are two different things,

[Dogtor]

Update! In the past three months we have sold our house, sold our horse trailer, paid off our car, paid down the mortgage, escaped NWM except for the insurance products, opened a solo 401k and received a windfall from work.

Stage of Life: Both still 34 year old veterinarians, he is 10 years in practice and I am at 9 this year.

Social Situation: Both still working full time, three kids, 3.5y, 2y, and 6 months

Annual Income: ~$475K

Net Worth: according to Mint 2.4 million (I’m still not sure this is correct)

Tax Bracket: 37% (37% Federal, 0% State)

State of residence: Still Texas... womp womp

Insurance Policies:

30 year term life about $1.5M each

We have disability policies but I would have to check on the details. - I still haven't done this

Low deductible low premium healthcare plans provided by each of our employers, I have the kids on mine because it is better.

Adequate auto and home insurance

Liability provided by our employers

Tenant on our property paying $500/month

Debts:

• Mortgage: $325K at 1%
• Student loans are paid off
• All three cars are owned outright
• No credit card debt, balance paid frequently
• Total debt: $325K

Assets:

• Property: Zillow value $850K
• His 401(k): $83K
• Her 401(k)s: $88K + $11K
• Backdoor ROTH IRAs: $16K each
• 529s: 24K, 17K, 3K respectively
• Taxable retirement: $73K
• Solo 401K: not funded yet
• Emergency Fund: about 60K
• Cash $600K

Portfolio Size: $887K + kids $44K

• His 401(k) 9%
  • Mass Mutual
• Her 401(k)s: 11%
  • Fidelity VFIFX 10%
  • Voya TGBAX, ABALX 1% - this is the current employer with a match, but was only able to contribute 4K ish annually due to high earner limits
• Her Roth: 2%
  • Vanguard VTWAX
• His Roth: 2%
  • Vanguard VTSAX
• Vanguard Taxable account: 8%
  • VTI 80%
  • VBTLX 10%
  • TSLA 2.5%
  • RIVN 2.5%
  • Cash 5%
• Cash 68%
• Solo 401k VTSAX 0%

Current questions... how are we doing now? Where do we still need work? Where should I put the 600K... I assume in the market per our written financial plan since our mortgage is at 1% and getting a construction loan and building is currently on hold. I also have a new equity option available at work... I know without any info there's not much you can say but what questions should I be asking prior to investing in it? I've already asked to see their 409a or most current valuation.

TIA!

[Tangler]

Update! In the past three months we have sold our house, sold our horse trailer, paid off our car, paid down the mortgage, escaped NWM except for the insurance products, opened a solo 401k and received a windfall from work.

Stage of Life: Both still 34 year old veterinarians, he is 10 years in practice and I am at 9 this year.

Social Situation: Both still working full time, three kids, 3.5y, 2y, and 6 months

Annual Income: ~$475K

Net Worth: according to Mint 2.4 million (I’m still not sure this is correct)

Tax Bracket: 37% (37% Federal, 0% State)

State of residence: Still Texas... womp womp

Insurance Policies:

30 year term life about $1.5M each

We have disability policies but I would have to check on the details. - I still haven't done this

Low deductible low premium healthcare plans provided by each of our employers, I have the kids on mine because it is better.

Adequate auto and home insurance

Liability provided by our employers

Tenant on our property paying $500/month

Debts:

• Mortgage: $325K at 1%
• Student loans are paid off
• All three cars are owned outright
• No credit card debt, balance paid frequently
• Total debt: $325K

Assets:

• Property: Zillow value $850K
• His 401(k): $83K
• Her 401(k)s: $88K + $11K
• Backdoor ROTH IRAs: $16K each
• 529s: 24K, 17K, 3K respectively
• Taxable retirement: $73K
• Solo 401K: not funded yet
• Emergency Fund: about 60K
• Cash $600K

Portfolio Size: $887K + kids $44K

• His 401(k) 9%
  • Mass Mutual
• Her 401(k)s: 11%
  • Fidelity VFIFX 10%
  • Voya TGBAX, ABALX 1% - this is the current employer with a match, but was only able to contribute 4K ish annually due to high earner limits
• Her Roth: 2%
  • Vanguard VTWAX
• His Roth: 2%
  • Vanguard VTSAX
• Vanguard Taxable account: 8%
  • VTI 80%
  • VBTLX 10%
  • TSLA 2.5%
  • RIVN 2.5%
  • Cash 5%
• Cash 68%
• Solo 401k VTSAX 0%

Current questions... how are we doing now? Where do we still need work? Where should I put the 600K... I assume in the market per our written financial plan since our mortgage is at 1% and getting a construction loan and building is currently on hold. I also have a new equity option available at work... I know without any info there's not much you can say but what questions should I be asking prior to investing in it? I've already asked to see their 409a or most current valuation.

TIA!

Looks like you are doing well.

I won't unpack the whole thing but will say this:

1. "Costs matter" (Jack Bogle) Fees, expense ratios of funds, hidden charges by NWM, 12b-1 fees, loads (avoid all this by investing with vanguard as much as possible IMO)

2. If I was mid 30s, had cash and I had an emergency fund and I had a stable steady income and a house at 1% (how is that even possible? term? How long do you have that rate?) then I would pile every penny into a combo of VTI / VXUS (or the index fund versions, VTSAX / vanguard total international index fund).

I would probably put 50- 70% in VTI and 30-50% in VXUS and I would ignore it (don't mess with it) for 20-30 years.

3. Question: house: is this a place you can live for the next 20 years? If not you might need to modify 2 to save for a house. You will not get a 1% loan ever again so if you could live there for 5-10 years you will be ridiculously rich. Again, how long is the term on the 1% loan? Who gave you a loan for 1%?

Congratulations and thanks for the update.

[Dogtor]

2. If I was mid 30s, had cash and I had an emergency fund and I had a stable steady income and a house at 1% (how is that even possible? term? How long do you have that rate?) then I would pile every penny into a combo of VTI / VXUS (or the index fund versions, VTSAX / vanguard total international index fund).

I would probably put 50- 70% in VTI and 30-50% in VXUS and I would ignore it (don't mess with it) for 20-30 years.

3. Question: house: is this a place you can live for the next 20 years? If not you might need to modify 2 to save for a house. You will not get a 1% loan ever again so if you could live there for 5-10 years you will be ridiculously rich. Again, how long is the term on the 1% loan? Who gave you a loan for 1%?

My parents are holding the note for 1%. We've paid down 400K this year with the proceeds of our house sale.

The current place is not somewhere we can live long term with the kids without building (I mean, we could, but it wouldn't be comfortable). However, we are not ready to commit to building a larger home yet, and I'm not sure there's a reason to rush into that? We do likely need to plan to build in the next 3-5 years.

[HandFellow]

How is it you aren't sure about your net worth? Mint says 2.4M but the actual numbers say 1.4M. That's a huge difference.

Your original question was more centered around the van life vs. build a huge house life. Now we don't even know where you are living. You sold your house but can't live on the property your own. I'm not sure how to give advice to people who don't know what they want.

Assuming you are going to build a house in the near future, I would put 300k into the market, into a combination of the solo 401k and taxable account. Hold onto 300k for building plans etc.

[Dogtor]

HandFellow we can live on the current property, it’s just a very small house for a family of 5. Longer term we would need to build, and I would like to rent the smaller house.

I’m not sure where Mint is getting that number from so that’s why I’m confused about the net worth… we have about 950 in cash and investments, 550 in equity if you believe Zillow, so 1.5M is what I’m getting if you don’t include any other assets (cars, Airstream, etc).

[CordMcNally]

[USER="412"]
I’m not sure where Mint is getting that number from so that’s why I’m confused about the net worth… we have about 950 in cash and investments, 550 in equity if you believe Zillow, so 1.5M is what I’m getting if you don’t include any other assets (cars, Airstream, etc).

Mint lists everything on the left hand column. In the past it seems like sometimes they would list some accounts twice and you’d have to go in and clean the accounts up. It should be pretty easy to see where an extra $1M is coming from with a net worth of $1.4M.

[Tim]

Stop:

• You purchased land with a small house as a tenant. Family mortgage. Did you run the loan by your accountant? tax
• https://www.irs.gov/applicable-federal-rates I hope your loan is compliant. tax
• You sold your old house and have cash. tax
• The "dream house" is on hold "getting a construction loan and building is currently on hold." why?
• Where is a family of 5 living right now? life
• Bonus coming tax

New job and a pattern here: figure it out later. You have options, but you haven't made choices. I think its clear that the van life is out. But you did not rule it out.
HandFellow
"Your original question was more centered around the van life vs. build a huge house life. Now we don't even know where you are living. You sold your house but can't live on the property your own. I'm not sure how to give advice to people who don't know what they want."

My concern is the new job. They paid you well and you may have carved out a long term job. Without a contract, you can only play it as it comes. That and your housing is up in the air.
Basic: Job and where to live. You won't know about the job for another year. Take care of your taxes.