How much do you save/invest every year?

[Mman]

I consider your homestead part of your net worth, similar to any investment property.

If your home is worth $1M, and you paid it off then you have alot of Cash to do whatever you want. Sell it, buy a 300K home. HELOC. Refinance and pull out 600K.

I would never recommend taking a loan against your home but it carries the same potential as any other investment property.

the problem with using your home as retirement spending money is that it costs money to do so. Selling it is going to cost you like 6-8% of the sale price between agent fees and costs to get it ready for selling. Taking a HELOC forces you to pay interest (plus paying it back).

So it is definitely part of your net worth, just not equivalent to various types of retirement accounts in terms of spending ability for retirement income.

Homes are for living in.

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[emergentmd]

I agree where you live should not be used as leverage. Too much risk of being homeless. People move all the time, downsize when close to retirement so when its time to move, downsize it is a great cash bank.

We prob have 1M+ equity in our home and it is prob 3500 sq foot too big when we retire. When we get close to retiring/downsize/moving, I plan to keeping the home as an investment and doing a refinance to pull out 1M while still having 600K in equity.

 

[kratos99]

How does one leverage with a heloc? The bank will only give you a HELOC for an amount that is generally 75-80% of your EQUITY in the house. This is why you can't really get any meaningful one until many years into your mortgage. I'm not aware of any other such easily accessible/wide spread loan that allows nearly any average Joe to leverage 5x to sometimes even 33x their initial investment.

Basically when you leverage with your home, you are playing with borrowed money. Taking a HELOC out to invest is the same thing--using borrowed money to invest. You can also play with options which is also a form of leveraging or take on margin debt to invest.

IMO there is absolutely no benefit with real estate investment. If you are horny for real estate, a REIT is way easier and you will be cash flow positive from day one and have professional people manage things and be more efficient. And yes, I'm aware you can get professional managers to manage your property but that is still bothersome and yet another expense. I've seen all that can go wrong with RE investing as my best friend's wife is a realtor and I have many family members who invest in real estate as that's all they know. Investing in stocks/ETFs, either with your own money, or using margin debt, or HELOC money or options is a way easier path to wealth.

 

[kratos99]

the problem with using your home as retirement spending money is that it costs money to do so. Selling it is going to cost you like 6-8% of the sale price between agent fees and costs to get it ready for selling. Taking a HELOC forces you to pay interest (plus paying it back).

So it is definitely part of your net worth, just not equivalent to various types of retirement accounts in terms of spending ability for retirement income.

Homes are for living in.

Agreed. As for owning a vacation property, a property isn't going to take care of itself. You're going to either need to hire someone to upkeep it or do it yourself. You can rent it on Airbnb but you'd also need to clean it after every tenant which is basically then using your money to buy yourself a second job (a janitorial one-no offense to all the janitors out there). That plus I would get sick of going to the same vacation spot year after year after year. I'd much rather rent a place if I'm going on vacation... and just use my dividend money from my ETFs/stocks to do so.

 

[emergentmd]

Investing is all about diversification. When the market is hot, everyone wants to go into the market. When the market tanks, many do not have the time/discipline to ride it out which could take years to recover.

Stock market is definitely the most passive way to invest.

Anyone who thinks real estate investing has no benefits is either short sighted or do not understand the advantages. There are definitely disadvantages too as with any type of investing.

 

[TraderDoc]

Stock market is the greatest generator of wealth IMO. Real estate is also a phenomenal wealth generator but takes far more work but has tremendous advantages if done correctly .

Bull market -> invest in the best companies that change the way we live / work / play / experience the world around us / how we interact with one another and watch them compound over decades to set you financially free.

Bear market -> continue to invest in those same companies. If your fundamental thesis underlying those businesses change, then act appropriately -> aka sell them. This is where "knowing what you own" really really matters, but you should always know what you own. Bear markets test your conviction.

If we are really enter a true bear market, I'll be ready to sell put options on the companies I love to generate income and utilize volatility of the bear market the best I can.

Either way, market up / market down, there are always opportunities to capitalize on the stock market. Money never sleeps. Like everything when it comes to investing, all about how much effort you're willing to put in and your risk appetite / risk management strategies. Good luck to all.

 

[kratos99]

Investing is all about diversification. When the market is hot, everyone wants to go into the market. When the market tanks, many do not have the time/discipline to ride it out which could take years to recover.

Stock market is definitely the most passive way to invest.

Anyone who thinks real estate investing has no benefits is either short sighted or do not understand the advantages. There are definitely disadvantages too as with any type of investing.

I have RE exposure in my portfolio via REITs and publicly traded brokerages.

I understand the benefits and risks of actually holding a property and have decided it’s not for me. Yes I get that you can leverage and make magnify your gains. But that comes with risk as if your property drops a little bit you may end up owing more than what the investment is worth.

 

[bravotwozero]

529 (if kids and they will go to college).

I want to address the paying for college issue. I put away a little bit in investments for the kids college fund, via a UTMA account. However, I have no real intention of fully funding their college education. They need some skin in the game, can work hard, get into state schools with scholarships. Nobody paid for my undergrad, I worked and paid my own tuition, and then took out student loans for medschool like anyone else. So, I don't feel like I have any moral obligation to pay for my kids educations, especially if that's going to limit how much I can put away for my own retirement.

I'm sure there's others who feel differently.

 

[BioChemDork]

I want to address the paying for college issue. I put away a little bit in investments for the kids college fund, via a UTMA account. However, I have no real intention of fully funding their college education. They need some skin in the game, can work hard, get into state schools with scholarships. Nobody paid for my undergrad, I worked and paid my own tuition, and then took out student loans for medschool like anyone else. So, I don't feel like I have any moral obligation to pay for my kids educations, especially if that's going to limit how much I can put away for my own retirement.

I'm sure there's others who feel differently.

I have things as a mixture of 529 and UTMA, recognizing that we are fortunate enough that my child will not qualify for any sort of need based aid. The 529 for tax advantaged growth, and the UTMA for the "skin in the game" aspect that you mentioned. "Part of this is your money... are you sure you want to get that degree in interpretative ethnomusicology?"

Thinking back to when I was in college, loans didn't seem real. It was just some handwavey number. Money magically got direct deposited every semester, and I assumed that in the end it would all work out somehow. I mean after all, everyone was doing the same thing too; we couldn't all be wrong, could we? Having to cut a check every quarter and having to see the account balance go down will force my child to be contentious about spending and college choices. Mom and dad are still available as a reluctant safety net, but recognition is the first step towards success.

There's only $3k in the UTMA account at this point, and I'll ramp it up to about $10k or so while I'm still working full time to avoid paying the kiddie tax above $2.2k annual gains. The vast majority is going into the 529, growing tax free. Once I cut back on work I will start tilting contributions more towards the UTMA, since the marginal tax bracket will be lower and so the "kiddie tax" will be less of a tax drag on growth.

 

[doctalaughs]

. Nobody paid for my undergrad, I worked and paid my own tuition, and then took out student loans for medschool like anyone else. So, I don't feel like I have any moral obligation to pay for my kids educations, especially if that's going to limit how much I can put away for my own retirement.

I'm sure there's others who feel differently.

I do feel differently although it’s obviously a choice.

I think drive/motivation and work ethic is more instilled by the values growing up rather than “skin in the game.” Also, higher education costs are ridiculous now.

I will happily pay for any college+ grad school for my kids, maybe minus a token amount (5k? 10k?). This is a gift that will give them a huge head-start in wealth building.

Most of Americans can’t do that, and I understand it’s a privilege of wealth. But for me- what does it matter if I retire with 1-2M less? It won’t affect my lifestyle in retirement at all.

 

[Neopolymath]

I do feel differently although it’s obviously a choice.

I think drive/motivation and work ethic is more instilled by the values growing up rather than “skin in the game.” Also, higher education costs are ridiculous now.

I will happily pay for any college+ grad school for my kids, maybe minus a token amount (5k? 10k?). This is a gift that will give them a huge head-start in wealth building.

Most of Americans can’t do that, and I understand it’s a privilege of wealth. But for me- what does it matter if I retire with 1-2M less? It won’t affect my lifestyle in retirement at all.

I agree. It also reminds me of my friends who inherited millions of dollars around age 50 when they don't even need any of it. They have their business, practices, retirement, homes, debt paid off etc. It just sits in investment accounts untouched. Universally, they say even $50k at 30 years old would have been preferred and actually useful. It's was my experience as well when I was building small businesses and starting my life.

For my family, the gift of giving others things while we are alive to witness it is far more enjoyable to experience than a lesson that any smart kid can learn via other means. I guess you must know your kids and know that you can always change your mind if they just go off the rails or do something stupid.

For example, if my kid goes to AA school and graduates in their early 20s, I think about the utility of being that age and making 6 figures with no debt. The opportunities to build your life are endless. Was I really paying debt and interest on something financially trivial to my family instead when I was that age? It's a $0.02 lesson that costs the person $100 IMO.

 

[FutureInternist]

I want to address the paying for college issue. I put away a little bit in investments for the kids college fund, via a UTMA account. However, I have no real intention of fully funding their college education. They need some skin in the game, can work hard, get into state schools with scholarships. Nobody paid for my undergrad, I worked and paid my own tuition, and then took out student loans for medschool like anyone else. So, I don't feel like I have any moral obligation to pay for my kids educations, especially if that's going to limit how much I can put away for my own retirement.

I'm sure there's others who feel differently.

One added benefit of 529 is that it can be transferred to any relative so you could actually end up funding your grandkids’ education.

Additionally, 529 has another quirk that allows someone to put in up to $150,000 in ONE year as a “I really mean to do this over 5 years” so no tax paid by the recipient, which can lower the donor’s tax burden

 

[mvenus929]

I want to address the paying for college issue. I put away a little bit in investments for the kids college fund, via a UTMA account. However, I have no real intention of fully funding their college education. They need some skin in the game, can work hard, get into state schools with scholarships. Nobody paid for my undergrad, I worked and paid my own tuition, and then took out student loans for medschool like anyone else. So, I don't feel like I have any moral obligation to pay for my kids educations, especially if that's going to limit how much I can put away for my own retirement.

I'm sure there's others who feel differently.

I do not have children, but have mixed feelings. On one hand, my family was poor, so I did my best to get scholarships and whatnot for college. My mom I think paid $5K total during my 3 years of college (combination of state school and lots and lots of scholarships), which I felt guilty for having her pay. I have since paid for all of my own education, though she has supported me in other ways (living in her house rent free post-college, lending me a car and paying car insurance up until fellowship...).

So I get having the kid put some effort in. But college costs are also ridiculous and student loans are awful. If I can finance a bachelor's at a state institution and they want to go to a private college on their own dime, that's a choice they can make.

 

[abolt18]

I will 'upgrade' from living on 50k/yr to 100k (not including student loan repayment). Gotta spend a little more on the family.

Why not make this a smaller upgrade? You bump that from 50K/yr to 72K/yr (6K/month) and you're going to be feeling pretty dang good! Go up by a little bit the next year. Again the following year. You're not spending a little more on the family with your proposed budget. You're spending a LOT more. Literally double.

 

[FutureInternist]

I'm adding in the etc.

Our credit card bill is basically about 100K per year which includes all the stuff I listed plus everything else you randomly buy throughout the year. Clothes, shoes, gas, whatever. Just normal day to day living stuff that we purchase without thinking about it.

You gotta think more my man/woman.. 😏.
But, hey, good for you.

 

[Monocles]

Just got my first attending paycheck... 85% post-tax saved and invested for the month!

 

[LukeChester]

It's good to save and invest when students work while studying but I also hear the same question from those who don't work full-time. And I'm really glad that even freshman students ask this question because we don't study financial literacy at school in general. I came across this article once, and I think it contains brilliant tips on this topic - but just in case a student will really follow them

 

[Lonestar]

I just did my tentative attending budget plan and I realized that I will only be able save/invest 80-85k/yr (on a 330k/yr salary)? Is that even good considering I plan to be FI in 10-12 yrs.

I might have to pick up some extra shifts because the goal was to save/invest 100k+/yr.

How much you guys/gals save/invest every year?

well this year will save roughly 340k. 20k in 401k, 104k in taxable account and 216k in a executive capital accumulation plan for nonprofit big Corp. spending roughly 140k this year. Hope this helps.

 

[Splenda88]

well this year will save roughly 340k. 20k in 401k, 104k in taxable account and 216k in a executive capital accumulation plan for nonprofit big Corp. spending roughly 140k this year. Hope this helps.

That is impressive. Are you a spine surgeon?

 

[airplanes]

Our goal this year was to save/invest 50% of gross. 25-30% to taxes. Okay to spend the rest guilt free. We are currently at 438k YTD saved. Last year we saved 280k, which was about 45% of gross. We have been busier this year. Obviously it is much easier to save more with a higher income/bigger shovel.

General ballpark/rule of thumb for the average MD starting in their early 30s is to save 20% of gross for a comfortable retirement at traditional retirement age. You can save more if you want to retire earlier or if you start late. It is interesting to compare but it's not a competition, everyone is playing to win their own game.

 

[deleted310399]

Gross W-2 HHI - 550K
Pre tax deferral ( combination of 2 401ks , a 403b and a 457 ) - 78k
Taxes - 160k ( federal , state , FICA )
Living expenses - 150k ( including PITI for a 590k mortgage on a house just over a million )
Savings - 162k+ 78k + 40k ( employer match ) - 280k ( 260k pre and post tax and 20k in a 529 )
Me - 35 , psychiatry , wife - 33 , hospitalist
Net worth - just over 2 mil
No other debt besides mortgage .

 

[FutureInternist]

Gross W-2 HHI - 550K
Pre tax deferral ( combination of 2 401ks , a 403b and a 457 ) - 78k
Taxes - 160k ( federal , state , FICA )
Living expenses - 150k ( including PITI for a 590k mortgage on a house just over a million )
Savings - 162k+ 78k + 40k ( employer match ) - 280k ( 260k pre and post tax and 20k in a 529 )
Me - 35 , psychiatry , wife - 33 , hospitalist
Net worth - just over 2 mil
No other debt besides mortgage .

Awesome stuff… just wanted to mention Roth IRA, add some extras to 529, and HSA

Roth IRA - (that you will have to do a “backdoor conversion” on).

You and spouse can put $6k each (in separate accounts), that is post-tax and hence all distributions are tax free.

Since you have a 529, seems kids are in the plan… so you can use the Roth IRA as their inheritance, and they will have 10 years after your death to get all the $ out (although they will pay taxes on it).

Also… for 529, you and spouse can put up to 15K each per year, and not have the recipient pay any taxes on it.. BUT if you get a huge bonus or something like that, you could put up to 5 years of $ into the account at once, but just say that you are “spreading it out” over 5 years on taxes and no tax due by kiddo.

Additionally, so far, 529 is the only thing that can be passed down to 2nd generation so if your kids don’t go to college for whatever reason, you can still transfer it to their name, and they can in turn transfer it to their kids

Lastly, HSA….. for younger folks with little medical expenses it acts as a “pseduo 401K” allowing even more tax deferred investment.
It is pre-tax and maxes out at $7200 for a family, so even if your deductible is that much, you still are getting a 30%“discount” on your medical expenses.
Once you reach a certain minimum, you can call your HSA folks and ask them to invest in a target date mutual fund.
At 65, all the $ you haven’t used for medical expenses, can now be used for whatever (just like a 401K/457).

 

[Monocles]

Gross W-2 HHI - 550K
Pre tax deferral ( combination of 2 401ks , a 403b and a 457 ) - 78k
Taxes - 160k ( federal , state , FICA )
Living expenses - 150k ( including PITI for a 590k mortgage on a house just over a million )
Savings - 162k+ 78k + 40k ( employer match ) - 280k ( 260k pre and post tax and 20k in a 529 )
Me - 35 , psychiatry , wife - 33 , hospitalist
Net worth - just over 2 mil
No other debt besides mortgage .

Incredible! Do either of you plan on cutting back hours? Again really nice work. I'm so jealous of double physician households in the finance community!

 

[deleted310399]

Awesome stuff… just wanted to mention Roth IRA, add some extras to 529, and HSA

Roth IRA - (that you will have to do a “backdoor conversion” on).

You and spouse can put $6k each (in separate accounts), that is post-tax and hence all distributions are tax free.

Since you have a 529, seems kids are in the plan… so you can use the Roth IRA as their inheritance, and they will have 10 years after your death to get all the $ out (although they will pay taxes on it).

Also… for 529, you and spouse can put up to 15K each per year, and not have the recipient pay any taxes on it.. BUT if you get a huge bonus or something like that, you could put up to 5 years of $ into the account at once, but just say that you are “spreading it out” over 5 years on taxes and no tax due by kiddo.

Additionally, so far, 529 is the only thing that can be passed down to 2nd generation so if your kids don’t go to college for whatever reason, you can still transfer it to their name, and they can in turn transfer it to their kids

Lastly, HSA….. for younger folks with little medical expenses it acts as a “pseduo 401K” allowing even more tax deferred investment.
It is pre-tax and maxes out at $6500 for a family, so even if your deductible is that much, you still are getting a 30%“discount” on your medical expenses.
Once you reach a certain minimum, you can call your HSA folks and ask them to invest in a target date mutual fund.
At 65, all the $ you haven’t used for medical expenses, can now be used for whatever (just like a 401K/457).

Thanks .
Have been thinking about starting a backdoor Roth for sometime now but laziness has gotten in the way ..!
Don't have access to a HSA because of the type of health plan we have at work but it would have been great because of the triple tax benefits
We have a 3 year old and planning on another one . Will look into putting in more . The 529 has about 32k in it .

 

[deleted310399]

Incredible! Do either of you plan on cutting back hours? Again really nice work. I'm so jealous of double physician households in the finance community!

Thank you . We don't really work that much ( about 36 hours/week for me and close to 40 for wife ) . I am trying to increase my WRvus by billing better so I can make about 350k/year by working the same hours . My wife can probably go to 0.875 FTE then ( 14 shifts/month . These are 10 hour shifts )

 

[Mman]

Lastly, HSA….. for younger folks with little medical expenses it acts as a “pseduo 401K” allowing even more tax deferred investment.
It is pre-tax and maxes out at $6500 for a family, so even if your deductible is that much, you still are getting a 30%“discount” on your medical expenses.

HSA max contribution goes up every year. In 2021, it is $7200 for a family and in 2022 it will go up to $7300 for a family (both numbers go up by $1000 if you are 55 or over).

 

[FutureInternist]

Consider switching to a HDHP (if possible), since whatever $ you don’t use can be invested.

Most hospitals etc have that option for docs and execs

 

[FutureInternist]

HSA max contribution goes up every year. In 2021, it is $7200 for a family and in 2022 it will go up to $7300 for a family (both numbers go up by $1000 if you are 55 or over).

Fixed… thanks

 

[Nocturnist]

Gross W-2 HHI - 550K
Pre tax deferral ( combination of 2 401ks , a 403b and a 457 ) - 78k
Taxes - 160k ( federal , state , FICA )
Living expenses - 150k ( including PITI for a 590k mortgage on a house just over a million )
Savings - 162k+ 78k + 40k ( employer match ) - 280k ( 260k pre and post tax and 20k in a 529 )
Me - 35 , psychiatry , wife - 33 , hospitalist
Net worth - just over 2 mil
No other debt besides mortgage .

Nice work!

Mind if I ask how you've managed to amass a net worth over 2m with those savings at this age? I'm estimating you're probably around 5 years and your wife is 3 years out of residency, I'm guessing your combined gross income since graduating has been roughly in the 2-2.5m range.

Just wondering because I make around what you two make combined, am 5 years into practice (so around 3M gross as an attending to date), save at a similar rate to you (somewhere around 50% of gross) but am not yet quite at 2M NW. With my SO who makes 6 figures, we are over, but not quite there yet individually.

 

[deleted310399]

Nice work!

Mind if I ask how you've managed to amass a net worth over 2m with those savings at this age? I'm estimating you're probably around 5 years and your wife is 3 years out of residency, I'm guessing your combined gross income since graduating has been roughly in the 2-2.5m range.

Just wondering because I make around what you two make combined, am 5 years into practice (so around 3M gross as an attending to date), save at a similar rate to you (somewhere around 50% of gross) but am not yet quite at 2M NW. With my SO who makes 6 figures, we are over, but not quite there yet individually.

Thanks and congrats on a great income . Are you a hospitalist also ?

Our NW is probably a combination of things -
- although I say 550k , the average is higher . Last year for example we made around 650k combined . I had a very lucrative moonlighting opportunity and made 90k extra just working 15 weekends from home . 550k is the minimum so to say. We have probably made over 3 mil since 2016 in gross income .
- no student loans for either of us
- Both me and my wife finished training in 2016 . She was a young medical school graduate
- Saving and investing aggressively ( 250-300k/year past 5 years ) . The markets have had great returns over the last few years as you know
- Increase in real estate prices . The value of our home has increased over 200 k in a little over a year . We never expected this
- About 170k is inheritance ( half share in a house )
- also I will be 36 in less than a week

I don't think we have done anything special . Just invested every month and watch it grow.

 

[Nocturnist]

Thanks and congrats on a great income . Are you a hospitalist also ?

Our NW is probably a combination of things -
- although I say 550k , the average is higher . Last year for example we made around 630k combined . I had a very lucrative moonlighting opportunity and made about 90k extra just working about 15 weekends from home . 550k is the minimum so to say. We have probably made over 3 mil since 2016 in gross income .
- no student loans for either of us
- Both me and my wife finished training in 2016 . She was a young medical school graduate
- Saving and investing aggressively ( 250-300k/year past 5 years ) . The markets have had great returns over the last few years as you know
- Increase in real estate prices . The value of our home has increased over 200 k in a little over a year . We never expected this .
- About 170k is inheritance ( half share in a house )

I don't think we have done anything special . Just invested every month and watch it grow.

Gotcha, that makes sense. I assumed your wife worked a couple years less so between that, your inheritance, and starting loan free i think that accounts for the difference. I'm a hospitalist working nights, close to 2 FTEs. 550k is my average as well, 2020 was 600k since less traveling meant more moonlighting.
Very similar (nothing special) strategy to you, which is why I was curious. I max out a 403 and 457, SO maxes a 401- what's left is split between brokerage account and paying down extra on our home, which has also appreciated 200k in past year. Only difference is we bought a second home this year. Total between us is around 1.1m in equity, 1M in stocks/retirement, rest in cash.

 

[finalpsychyear]

Gotcha, that makes sense. I assumed your wife worked a couple years less so between that, your inheritance, and starting loan free i think that accounts for the difference. I'm a hospitalist working nights, close to 2 FTEs. 550k is my average as well, 2020 was 600k since less traveling meant more moonlighting.
Very similar (nothing special) strategy to you, which is why I was curious. I max out a 403 and 457, SO maxes a 401- what's left is split between brokerage account and paying down extra on our home, which has also appreciated 200k in past year. Only difference is we bought a second home this year. Total between us is around 1.1m in equity, 1M in stocks/retirement, rest in cash.

I have several friends similar aged that doubled their NW in the last 12-18 mo simply because of what their post tax investment accounts did and have hit their "FIRE" numbers shockingly fast in 5 years time. Some people have full control of 401k's and are able to invest aggressively in that along with aggressive brokerage accounts. A few were very aware of crypto, tesla, moderna along with the FAANG stocks they considered safer investments etc in the last 12-18 mo and put DCA 50-100k over that time in some of these and have hit the numbers you guys are discussing while making half the gross income so maybe they all are insanely lucky.

 

[turnupthegas]

Roughly 130k a year. 2 specialist physician household.

57k - Company retirement
39k - 457/403b
12k - Wife/Myself Backdoor Roth
7.2K HSA
10-15K Brokerage/Crypto

I have FIRE in mind, but I like fast things and traveling.

 

[doctalaughs]

Too bad it looks like the dems are going to take away backdoor Roth and mega backdoor Roth. I did many years of both those earlier in my career and estimate it’s close to 3/4 of a million of my net worth now (and tax free withdrawal, continuing to grow tax free)

 

[FutureInternist]

Roughly 130k a year. 2 physician household.

57k - Company retirement
39k - 457/403b
12k - Wife/Myself Backdoor Roth
7.2K HSA
10-15K Brokerage/Crypto

I have FIRE in mind, but I like fast things and traveling.

If kids, or plan on having them, start a 529 as well.
Can do so under your name now, and then transfer to kid’s when born

 

[Mman]

Too bad it looks like the dems are going to take away backdoor Roth and mega backdoor Roth.

their proposal would end it in 2031 so not for another 10 years

 

[doctalaughs]

their proposal would end it in 2031 so not for another 10 years

I don’t think you are reading the proposal correctly.

It immediately stops after-tax money conversions to Roth IRAs starting Jan 1 2022 (ie the backdoor roth ira and mega backdoor Roth ira).


The 2031 or 2032 provision is for all OTHER Roth conversions (such as 401k pretax to Roth, which is much less advantageous although sometimes useful in certain tax scenarios).

 

[Mman]

I don’t think you are reading the proposal correctly.

It immediately stops after-tax money conversions to Roth IRAs starting Jan 1 2022 (ie the backdoor roth ira and mega backdoor Roth ira).


The 2031 or 2032 provision is for all OTHER Roth conversions (such as 401k pretax to Roth, which is much less advantageous although sometimes useful in certain tax scenarios).

House Democrats propose new retirement plan rules for the rich, including contribution limits and a repeal of Roth conversions

contributions to IRAs stop if you already have >$10M in account value, that is right away

The legislation would end the backdoor Roth IRA strategy by eliminating Roth conversions for both IRAs and workplace plans such as 401(k) plans.

The policy would apply at the same income thresholds listed above. It would count for distributions, transfers and contributions made in taxable years beginning after Dec. 31, 2031.

so back door Roth conversions are still good for another 10 years, although mega-back door would be stopped

 

[doctalaughs]

House Democrats propose new retirement plan rules for the rich, including contribution limits and a repeal of Roth conversions

contributions to IRAs stop if you already have >$10M in account value, that is right away

so back door Roth conversions are still good for another 10 years, although mega-back door would be stopped

I’m not a cpa - but the article you linked doesn’t seem to clearly state what you said. I think these two links (one from WCI) are very clear that you can contribute to an IRA until you have 10 mill (til 2032), but cannot convert after tax money in that IRA to a Roth (immediately in 2022):

Backdoor Roth IRA 2024: 3 Simple Steps

A backdoor Roth IRA is a way to accumulate money in a Roth even if you’re no longer eligible to contribute to a Roth IRA.

districtcapitalmanagement.com

Congress Proposed Legislation on IRA Accounts | White Coat Investor

Congress is proposing tax changes that could affect the Roth IRAs and tax brackets of high earners. Here's what you should be thinking about.

www.whitecoatinvestor.com

 

[mvenus929]

House Democrats propose new retirement plan rules for the rich, including contribution limits and a repeal of Roth conversions

contributions to IRAs stop if you already have >$10M in account value, that is right away



so back door Roth conversions are still good for another 10 years, although mega-back door would be stopped

My impression is that after-tax conversions to Roth would stop as of 2022 (so no more backdoor Roth), but you could still convert pre-tax contributions to Roth until 2023.

 

[turnupthegas]

If kids, or plan on having them, start a 529 as well.
Can do so under your name now, and then transfer to kid’s when born

tDidn't know that. I'll get on it. Thanks!

 

[Lonestar]

well this year will save roughly 340k. 20k in 401k, 104k in taxable account and 216k in a executive capital accumulation plan for nonprofit big Corp. spending roughly 140k this year. Hope this helps.

That is impressive. Are you a spine surgeon?

No. No Spine surgeon. Anesthesiologist. Wife stays at home. One salary. She is frugal and that helps a lot. Choose wisely. Besides the govt is about rip us off completely over the next few years. I think I will enjoy my late 40s rather then slaving away to reach some mythical 6-7+ mil net worth figure at 50. Life is too short. Bye.

 

[goldsummer]

I'm saving about 100k a year so far. On year 2 of attending life. I have just been mostly saving it up through this point. But I've been doing a lot more research in my free time recently and also learning from the lovely people here and will hopefully be making some wiser decisions moving forward.

 

[Splenda88]

Nice thread...

I am on track to do better than I expected given my projected income for this year with be around 400-410k... Already saved/invested ~90k, but I am using 50k out of that money to buy a house.

 

[finalpsychyear]

for those working a full career if you are savings near 100k ballpark then you have the luxury to spend more since you plan to work most likely into your 50s. For those that want to FIRE by mid 40s they should aim for 40-50% gross or 100k min imo.

My definition of fire is simply living on 100k/yr which is a great chunk of money esp once you have no car payments/mortage or debts but doesn't nearly feel like alot when your in the midst of having 1200 ish car payments and 3000-4000 morgtages but ultimately those get paid off and then its sweet.


Also, most on here are in the saving 100-120 ish range with a few outliers in the 300 ish category with maybe dual doc incomes in at least one. Most I feel are wanting to work full 25-30 year careers so that works out great with that savings.

 

[Nocturnist]

for those working a full career if you are savings near 100k ballpark then you have the luxury to spend more since you plan to work most likely into your 50s. For those that want to FIRE by mid 40s they should aim for 40-50% gross or 100k min imo.

My definition of fire is simply living on 100k/yr which is a great chunk of money esp once you have no car payments/mortage or debts but doesn't nearly feel like alot when your in the midst of having 1200 ish car payments and 3000-4000 morgtages but ultimately those get paid off and then its sweet.


Also, most on here are in the saving 100-120 ish range with a few outliers in the 300 ish category with maybe dual doc incomes in at least one. Most I feel are wanting to work full 25-30 year careers so that works out great with that savings.

100k a year gross or net? At the risk of coming off a bit out of touch, 100k a year gross won't get you a comfortable enough of a lifestyle around the northeast. I dont live in a mansion but my property taxes alone are 16k and going up every year. Add home insurance, utilities, water, landscaping, basic maintenance and thats a bare minimum 25-30k a year for my shelter alone with my mortgage out of the equation. My car is paid off, but insurance, gas, maintenance running me another 5-10k per car. If I'm netting 70 out of that 100k, that's already half my budget and I haven't even bought food, health insurance, and I'm not even talking about any travel or leisure. My number around this part of the country I'm shooting for is more like 200-250k.

 

[finalpsychyear]

100k a year gross or net? At the risk of coming off a bit out of touch, 100k a year gross won't get you a comfortable enough of a lifestyle around the northeast. I dont live in a mansion but my property taxes alone are 16k and going up every year. Add home insurance, utilities, water, landscaping, basic maintenance and thats a bare minimum 25-30k a year for my shelter alone with my mortgage out of the equation. My car is paid off, but insurance, gas, maintenance running me another 5-10k per car. If I'm netting 70 out of that 100k, that's already half my budget and I haven't even bought food, health insurance, and I'm not even talking about any travel or leisure. My number around this part of the country I'm shooting for is more like 200-250k.

net

-I can't fathom paying 10k per car after its paid off in yearly maintenance. I downgraded myself to hybrid vehicles and eventually all electric as i think the trend will be in the future. No doubt living out west or in the north east is expensive. That 50k you spend on non mortage related housing/ 1-2 car maintenance someone else is investing to the tune of 800k over 10 years but the trade off is they probably live somewhere less desirable and your not really effected by it with a dual income and enjoy your area.

 

[emergentmd]

Basically when you leverage with your home, you are playing with borrowed money. Taking a HELOC out to invest is the same thing--using borrowed money to invest. You can also play with options which is also a form of leveraging or take on margin debt to invest.

IMO there is absolutely no benefit with real estate investment. If you are horny for real estate, a REIT is way easier and you will be cash flow positive from day one and have professional people manage things and be more efficient. And yes, I'm aware you can get professional managers to manage your property but that is still bothersome and yet another expense. I've seen all that can go wrong with RE investing as my best friend's wife is a realtor and I have many family members who invest in real estate as that's all they know. Investing in stocks/ETFs, either with your own money, or using margin debt, or HELOC money or options is a way easier path to wealth.

I think you are misunderstanding the point of leveraging your money.

With real estate, you can put down 20-30% and own the whole place. So 100K allows you to buy a 400K property. So if the property goes up 50% to 600K, you have made 3x your initial investment.

I bought a duplex 7 yrs ago for 160K, 50K down. Rent has essentially paid all carrying costs, very little net profit. Had a note of 70K left, sold it to an investor for 380K, So I netted 300K with minimal closing costs as there was no realtors involved. So essentially 6x my money.

If you did a 50K HELOC and put it in the market, there is no leverage unless you margin which is risky/expensive or leveraged EFTs that will kill you with decay . So even if a stock goes up 100%, you double your money. Even if you somehow made 6x your money, and had 300K you are paying tax on 250K so about 200K in profit.

I did a 1031 and avoided cap gains tax that is not possible with non IRA $$

I use property managers and haven't visited the duplex in 7 yrs other than once during a renovation, so it is very passive for me.

I just cash purchased another duplex for 400K, put in 50K to renovate/furnish and since the beginning of the year getting $5k/mo in rent after all expenses projected to be about 55K/yr with vacancies and 45K net profit or 10% ROI. I plan on taking out a 420K mortgage on its 600K home value taking my net profit after P&I to about 18K on a now 30K investment putting my ROI at 60% while holding for appreciation.

 

[Nocturnist]

Real estate is arguably the best investment upper middle class families can make.

I took a 15-yr mortgage on single family that cost 150k in 2011 when things were cheap. Spent ~45k for down payment/closing/renovation. I was making ~$150 profit after all expenses including property management fee. I used that ~$150 profit to pay down the mortgage. < 11 yrs later, home is paid off and worth between 500k-550k. Now, I am netting $1400-1500/month. I doubt that 45k would have put me in that same position now had it been invested in the stock market.

I will be closing on my 3rd property (primary home included) next month and plan to have 4-5 more properties in the next 9 yrs.

I look at real estate as a long term investment. There is no way in hell (unless the whole country burn down), home price will be the same 20 yrs from today.

I also invest in the stock market. It's kind of a 50/50 thing.

This is a nice example of leveraging because the stock market has appreciated 303% since 2011, which is pretty close to that home's appreciated but a 10x return on your investment.

That said I would greatly caution anybody who tries to grant cardone or jared kushner their way to a billion dollar net worth with rental properties- it is far less rosy than your experiences.

I bought my apartment in residency. Great apartment, well cared for. When I graduated and moved out I decided I should give this landlording thing a shot.

My first tenant ended up being a professional tenant. Complete douche canoe. Had to evict him. Months of rents not paid, thousands of dollars of damages and fees in the process.

My next tenant's lease was actually up today, he told me months he wasn't renewing it. Great, so I gave him a 60 day notice of non renewal and found a postdoc that was going to pay 25% more and stay for the next 4 years. Current tenant decides a couple weeks ago since he hasn't found another place to live yet he ain't leaving and that I "should really show some gratitude he paid through the pandemic". When is he leaving? No clue. Lost the new tenant, now in process of filing for eviction (3-4 month process, several thousand dollars, not to mention lost rent).

Last month the condo management company thought a leak was coming from my apartment- maintenance guy went in unannounced, punched a huge hole in a wall. Leak wasn't coming from my apartment, but you think I have recourse to ask them to fix it? Maybe if I take them to court, not worth it.

Yes I have a management company, no I haven't had to step foot there since- still, its a near weekly perirectal pain to just manage one rental.
Did I mention the association decided condo fees are doubled the last 4 years to ramp up reserves? Your may be thinking your ROI is 5 or 10% or whatever, but it doesn't take much more than needing to replace an AC, water heater, boiler, or just a crappy tenant to cut into those profits and frankly make your life miserable.

Even with a management company, its far from hands off or stress free. Not discouraging anybody from it, just understand you need mental fortitude and many thousands in extra reserves set aside to weather it. I'm gonna give it one more shot before I cut my losses and sell it, but would I do it again? Nope. Even if the returns are lower, No ETF or REIT has ever disturbed my peace.

 

[mvenus929]

This is a nice example of leveraging because the stock market has appreciated 303% since 2011, which is pretty close to that home's appreciated but a 10x return on your investment.

That said I would greatly caution anybody who tries to grant cardone or jared kushner their way to a billion dollar net worth with rental properties- it is far less rosy than your experiences.

I bought my apartment in residency. Great apartment, well cared for. When I graduated and moved out I decided I should give this landlording thing a shot.

My first tenant ended up being a professional tenant. Complete douche canoe. Had to evict him. Months of rents not paid, thousands of dollars of damages and fees in the process.

My next tenant's lease was actually up today, he told me months he wasn't renewing it. Great, so I gave him a 60 day notice of non renewal and found a postdoc that was going to pay 25% more and stay for the next 4 years. Current tenant decides a couple weeks ago since he hasn't found another place to live yet he ain't leaving and that I "should really show some gratitude he paid through the pandemic". When is he leaving? No clue. Lost the new tenant, now in process of filing for eviction (3-4 month process, several thousand dollars, not to mention lost rent).

Last month the condo management company thought a leak was coming from my apartment- maintenance guy went in unannounced, punched a huge hole in a wall. Leak wasn't coming from my apartment, but you think I have recourse to ask them to fix it? Maybe if I take them to court, not worth it.

Yes I have a management company, no I haven't had to step foot there since- still, its a near weekly perirectal pain to just manage one rental.
Did I mention the association decided condo fees are doubled the last 4 years to ramp up reserves? Your may be thinking your ROI is 5 or 10% or whatever, but it doesn't take much more than needing to replace an AC, water heater, boiler, or just a crappy tenant to cut into those profits and frankly make your life miserable.

Even with a management company, its far from hands off or stress free. Not discouraging anybody from it, just understand you need mental fortitude and many thousands in extra reserves set aside to weather it. I'm gonna give it one more shot before I cut my losses and sell it, but would I do it again? Nope. Even if the returns are lower, No ETF or REIT has ever disturbed my peace.

This is more of my mom's experience with real estate, which means I'm not super eager to get involved. She had a house that she started to rent with a management company when she moved out. There would be months when the management company wouldn't tell her a thing, and then they'd charge huge turnover fees (like needing new carpet after a 1 year lease (previously changed right before the tenant moved in), but not withholding their security deposit). Then there would be months when the house was sitting empty. Then we had to evict a tenant that paid maybe once every other month. Meanwhile, she still had the mortgage from her current house, and while the rent would cover the mortgage--that only happened when it was occupied and the tenant was actually paying. She finally sold the property and has a huge burden off her shoulders now.