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What next? Early/mid career

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  • What next? Early/mid career

    Just turned 37, wife 36. She is 0.5 FTE. Practicing since 2014
    Household earnings $600-$670 depending on how much I want to work.
    Daughter 5, no plans for further kids
    Mortgage $647K on $1.2 mm house, 2.625% 20 year loan

    1. 401/457 = $735K
    2. Taxable account = $567K <— edit: backdoor Roth in this account, I know it’s not taxable but too lazy to separate it out. Annually maxed
    3. HSA $47K
    4. 529 $82K
    =$1.5 mm ish in accounts with ER fund
    **no student debt, paid off about $410K combined**

    I will have about $80-100K extra a year after my baseline savings of $160K/year in the above buckets.

    So what should I do next? Options:
    1. 529 increase in case use some for private school (HS & college) = $35K/year -- let's not degrade topic to public vs private
    2. bolus the taxable account
    3. private equity group for commercial real estate?
    **At this point taking the mortgage to term given inflationary pressures**

    I am leaning towards $15K a year to 529 with max of $200K in the account. Then bolusing the taxable $35K/year. With the $50K left decide on a higher risk option. Otherwise, maybe just dollar cost average the taxable contribution the full $85K all year.

    My life goal is basically to get to $5 mm and then go to 0.75 FTE. $10 mm and then 0.5 FTE. At that point I will decide to permanently fly business class because travel is what I value most. Hopefully reaching this by 50-55 years old (or earlier) and then staying 0.5 FTE until retirement at 65.
    Last edited by IlliniGopher; 01-07-2022, 05:10 PM.

  • #2
    -bolus the 529 upfront, especially since HS $10k per year drain anticipated there.
    private equity groups - use caution on this and just know what you're getting into and the people you're dealing with too.

    Double check if any other tax deferred space between the two of you ; backdoor roth at least a little at 650k earnings and IL, that's a bit of tax and anything deferred/offset will be significant --- so real estate with active participation can be a very lucrative option --- paging @whitebearddoc

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    • #3
      Oops yea clumped backdoor Roth in a bucket above

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      • #4
        Originally posted by StarTrekDoc View Post
        -bolus the 529 upfront, especially since HS $10k per year drain anticipated there.
        private equity groups - use caution on this and just know what you're getting into and the people you're dealing with too.

        Double check if any other tax deferred space between the two of you ; backdoor roth at least a little at 650k earnings and IL, that's a bit of tax and anything deferred/offset will be significant --- so real estate with active participation can be a very lucrative option --- paging @whitebearddoc
        $10K drain? I may have incorrectly written. It is $35,000 a year for high school.

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        • #5
          I’m in a very similar situation to you regarding income family and retirement goals (although I may stop at 5MM, no need for business class for me). We front loaded the 529 with about 120K and are now putting everything else (after maxing tax advantaged accounts of course) into a three fund taxable portfolio that is very equity heavy. I was wary of over-funding the 529 so will pay for the remaining educations expenses out of pocket.

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          • #6
            You can only use $10K from a 529 (per kid, per year) for payment of private K-12 tuition.

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            • #7
              A financial plan.
              Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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              • #8
                Originally posted by Hudama View Post
                You can only use $10K from a 529 (per kid, per year) for payment of private K-12 tuition.
                Ahh! I didn’t know that. Thanks

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                • #9
                  Originally posted by vtpaca View Post
                  I’m in a very similar situation to you regarding income family and retirement goals (although I may stop at 5MM, no need for business class for me). We front loaded the 529 with about 120K and are now putting everything else (after maxing tax advantaged accounts of course) into a three fund taxable portfolio that is very equity heavy. I was wary of over-funding the 529 so will pay for the remaining educations expenses out of pocket.
                  I think that’s the way to go (taxable). Boring but consistent

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                  • #10
                    Originally posted by jfoxcpacfp View Post
                    A financial plan.
                    ?

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                    • #11
                      Front load the 529 and then taxable. We never went beyond the annual max, but we opened an account for each parent for each child. We stopped at about age 11 or 12 if I recall.

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                      • #12
                        I would stick with taxable and just do an annual or monthly contribution to the 529.

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                        • #13
                          Originally posted by IlliniGopher View Post

                          ?
                          You are making/taking guesses as to what you should do with $80k - $100k/yr without knowing the future impact. That’s a lot of money to be guessing about. Not having a solid plan with steps to follow and a map to track progress along with periodic shifts, as needed to reorient toward your goals, encourages more splurges and/or higher expenses and/or unknown FI goals, etc. A financial plan will help you move forward with a much higher degree of certainty that you are making optimal choices (for starters).
                          Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

                          Comment


                          • #14
                            Originally posted by jfoxcpacfp View Post

                            You are making/taking guesses as to what you should do with $80k - $100k/yr without knowing the future impact. That’s a lot of money to be guessing about. Not having a solid plan with steps to follow and a map to track progress along with periodic shifts, as needed to reorient toward your goals, encourages more splurges and/or higher expenses and/or unknown FI goals, etc. A financial plan will help you move forward with a much higher degree of certainty that you are making optimal choices (for starters).
                            I don’t disagree. After paying student loans, refinancing to hedge against inflation, taking advantage of all tax advantages spaces, and contributing $6500 a month to my brokerage — I guess I am looking for ideas.

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                            • #15
                              Looks like you are living a good life and are doing well financially. Why not just do more of the same thing, add more money to brokerage account. Some people are good at alternate investments and real estate. I am not one of them. Unless you have a good plan, looking for something different to do with your money, does not necessarily make it a better plan than what you are already doing. Personally, for me paying off the house was the best option, you will move quicker into the part time mentality , when you realize your monthly expenses are a lot lower. Nothing like waking up every morning , thinking I am going to work because I want to , no because I have to.

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