Post Covid Finances

[Pharmist1720]

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Hello all, since March we've been paying the min on the wife's student loans, plus we sold a house so we've stockpiled cash and was wanting opinions on how to get the best use out of the cash.
Current situation: age - 35/31, 2 yo dependent
His income: $120,600 salary hospital staff
~$10,000 in OT/1099 job
Her income: ~$140,000 corporate retail staff

Retirement: His - 5% mandatory 403B with 10% added by employer
$19,500/yr voluntary 403B
Total - $223,000
Her - $19,500/yr, employer match 6%
Total - $115,000
Both with 90% in stocks, 10% in bonds

Her student loans - $190k at 4% refinanced thru sofi on 15yr term
Mortgage - $320k at 2.75% on 30yr term
No other debt
EF - $30k

After the sell of the house goes thru, we'll have approximately $70k on top of the emergency fund we already have in place. I'm thinking the best use of the money is to put a large chunk towards student loans then restarting the extra monthly payment and having them paid off as soon as possible. Am I overlooking any other options? Possibly starting an IRA for my wife or 529 for my son? Anybody see even a remote chance private student loans are forgiven post covid or after the election in November? Any opinions are appreciated. Thanks

 

[TheBlaah]

Private student loans forgiven? No way in hell, at least not by Biden or Trump.

I'd start with reducing your student loans.

The interest rate on your mortgage is actually quite good. I'm not entirely sure what the loan market's like now, but you may want to look into refinancing it to a 15yr to see if you can get the interest rate reduced further.

If either of your employers offers a HSA, the money put into that is deposited tax-free, grows tax-free, and can be withdrawn tax-free (if used for medical purposes). Limit on that is 7k a year for married couples.

A 529 account wouldn't be a bad idea either.

 

[Pharmist1720]

Yeah the student loan forgiveness thing is a dream I know. Just thinking what if Warren is selected as VP then Biden wins, then maybe something would happen with student loans. I think HSA is definitely my next move actually. Good thought.

 

[ValeRx]

If the HEROES Act got passed, it does include 10,000 towards student loans, private included.

 

[Argentium]

Even the student loan interest rate is not terrible.

Agree HSA would be my first thing, would also consider looking at Roth IRA rollover, mega-backdoor if your company offers it, 529 which was mentioned, and then DCA into the market in a post-tax brokerage. Your interest rates are solid enough that I would consider putting it into the market right now, esp. if your retirement is pretty far out and you don't have any upcoming large purchases

 

[pezdispenser]

How do you figure out if you can do a mega back door Roth?

Your 401k has to allow "after-tax contributions" and these are different to "Roth 401k" contributions even though a Roth is also after-tax. Then, ideally your 401k should also allow in-service withdrawals (while you're still working) so that you can transfer out your after-tax contributions to a Roth IRA ASAP so that you only pay taxes on the small amount of earnings, and then it will be completely tax free once in the Roth IRA. Alternatively, some plans allow in-plan conversions to convert the after-tax contributions to a Roth 401k, which will also be tax free from then on, but you won't have the choice of investments that you get with a Roth IRA.

 

[wagrxm2000]

I always promote debt free especially with the current conditions we are in.

Take that 4%

 

[Pharmist1720]

I always promote debt free especially with the current conditions we are in.

Take that 4%

Yeah, I'm leaning that route. Probably overthinking it when in reality being debt free other than mortgage should be the goal.

 

[Pharmist1720]

Hello all, since March we've been paying the min on the wife's student loans, plus we sold a house so we've stockpiled cash and was wanting opinions on how to get the best use out of the cash.
Current situation: age - 35/31, 2 yo dependent
His income: $120,600 salary hospital staff
~$10,000 in OT/1099 job
Her income: ~$140,000 corporate retail staff

Retirement: His - 5% mandatory 403B with 10% added by employer
$19,500/yr voluntary 403B
Total - $223,000
Her - $19,500/yr, employer match 6%
Total - $115,000
Both with 90% in stocks, 10% in bonds

Her student loans - $190k at 4% refinanced thru sofi on 15yr term
Mortgage - $320k at 2.75% on 30yr term
No other debt
EF - $30k

After the sell of the house goes thru, we'll have approximately $70k on top of the emergency fund we already have in place. I'm thinking the best use of the money is to put a large chunk towards student loans then restarting the extra monthly payment and having them paid off as soon as possible. Am I overlooking any other options? Possibly starting an IRA for my wife or 529 for my son? Anybody see even a remote chance private student loans are forgiven post covid or after the election in November? Any opinions are appreciated. Thanks

Update/questions:
Currently 37/33, 4 yo and 2 month old dependents
His income: $133,600 salary hospital staff
~$5,000 in OT/1099 work
Her income: ~$145,000 corporate retail, with up to ~$15k in bonus

Retirement: His - 5% mandatory 403b with 10% added by employer; $6,600 plus ~13k by employer
$20,500/yr voluntary 403b
$6,000/ backdoor Roth
Total: $360,000
Her: $20,500/yr, employer match 6%
$6,000/yr backdoor Roth
Total: $210,000
Both with 90% in stocks and 10% bonds

Her student loans - $88k refinanced at 2.49% on 5 year term
Mortgage - ~300k at 2.75 on 30 yr term
No other debt
EF - $30k

We kind of did a mixed approach 2 years ago with the money and put some towards student loans and invested some. With our current debt level and interest rate, I think I'm good with just paying the minimal payments and investing any extra. Some questions, we can do pre-tax or post tax with our retirement contributions. Which is the better option? We live in a 5% state income state, would just doing a 50-50 split be the best way? Also, I have a 457 option at my workplace, should I switch my voluntary contributions to 457 instead of 403b? Or try to contribute to both? For my wife, is her only additional option contributing to a brokerage account? We are planning to start the HSA next open enrollment now that having kids should be done. Any other opinions on changes that should be made to improve the overall financial picture?

 

[NITRAS]

My opinion: For younger people, with good income who expect to have sizable nest egg, ROTH is the best option. You don’t have to worry about RMD’s and as I am maxing out everything, I am effectively contributing more. I should have a 7 figure in tax advantaged accounts.

I’d also max out your 403b before your 457. The 457 is a non-qualified retirement account and technically subject to risk if your employer goes bankrupt. I’d actually pay off loans and use your 457 as the last place to park money. I’d make sure I had 529/UTMA’s accounts funded for the kids and a taxable account first.

 

[Pharmist1720]

My opinion: For younger people, with good income who expect to have sizable nest egg, ROTH is the best option. You don’t have to worry about RMD’s and as I am maxing out everything, I am effectively contributing more. I should have a 7 figure in tax advantaged accounts.

I’d also max out your 403b before your 457. The 457 is a non-qualified retirement account and technically subject to risk if your employer goes bankrupt. I’d actually pay off loans and use your 457 as the last place to park money. I’d make sure I had 529/UTMA’s accounts funded for the kids and a taxable account first.

Thanks for the reply. I should've added that the 457 is a governmental 457 plan.

 

[Pharmist1720]

Another question, one of my part time employers, is a former full time employer. When I first started working there, I received a pension each year from 2011-2013. Since I have stayed on part time, I haven’t done anything with the pension. I am going to fully leave the employee soon, so my question is what should I do with the pension? I have around $27k in it. Can I just put it in a rollover IRA? How would that affect my backdoor IRA? Can I transfer to the rollover then to my 403b so it doesn’t affect my backdoor IRA? Anything else I should consider when withdrawing the pension funds? Thanks

 

[CarpetTable45]

Another question, one of my part time employers, is a former full time employer. When I first started working there, I received a pension each year from 2011-2013. Since I have stayed on part time, I haven’t done anything with the pension. I am going to fully leave the employee soon, so my question is what should I do with the pension? I have around $27k in it. Can I just put it in a rollover IRA? How would that affect my backdoor IRA? Can I transfer to the rollover then to my 403b so it doesn’t affect my backdoor IRA? Anything else I should consider when withdrawing the pension funds? Thanks

In the US, pension usually refers to defined benefit (DB) pension, which is an annuity you get per the terms of the DB pension plan after you retire.

I assume you actually mean you and possibly your employer contributed to a 401(k). I never see a reason to not have control of my money, so I always recommend rolling it over into an IRA at whatever brokerage you like and buying VOO or VTI or VT or target date funds or whatever low cost broad market index fund suits your fancy.

For how to do a backdoor roth, read this:

How to Do a Backdoor Roth IRA [Step-by-Step Guide] | White Coat Investor

This Backdoor Roth IRA tutorial takes you step-by-step through the contribution process, including Form 8606, tax implications, common mistakes, and lots more.

www.whitecoatinvestor.com

 

[NITRAS]

Another question, one of my part time employers, is a former full time employer. When I first started working there, I received a pension each year from 2011-2013. Since I have stayed on part time, I haven’t done anything with the pension. I am going to fully leave the employee soon, so my question is what should I do with the pension? I have around $27k in it. Can I just put it in a rollover IRA? How would that affect my backdoor IRA? Can I transfer to the rollover then to my 403b so it doesn’t affect my backdoor IRA? Anything else I should consider when withdrawing the pension funds? Thanks

If it were me, I would roll it to a ROTH IRA into good funds. This would generate some taxes, but wouldn’t mess with my back door ROTHs. If your new company 401k allows, you can roll it into their plan and avoid interfering with your back door ROTH. I’d contact your new 401k company first to see what or if they can roll it over before I’d roll it to an IRA.

 

[Pharmist1720]

Update/questions:
Currently 37/33, 4 yo and 2 month old dependents
His income: $133,600 salary hospital staff
~$5,000 in OT/1099 work
Her income: ~$145,000 corporate retail, with up to ~$15k in bonus

Retirement: His - 5% mandatory 403b with 10% added by employer; $6,600 plus ~13k by employer
$20,500/yr voluntary 403b
$6,000/ backdoor Roth
Total: $360,000
Her: $20,500/yr, employer match 6%
$6,000/yr backdoor Roth
Total: $210,000
Both with 90% in stocks and 10% bonds

Her student loans - $88k refinanced at 2.49% on 5 year term
Mortgage - ~300k at 2.75 on 30 yr term
No other debt
EF - $30k

We kind of did a mixed approach 2 years ago with the money and put some towards student loans and invested some. With our current debt level and interest rate, I think I'm good with just paying the minimal payments and investing any extra. Some questions, we can do pre-tax or post tax with our retirement contributions. Which is the better option? We live in a 5% state income state, would just doing a 50-50 split be the best way? Also, I have a 457 option at my workplace, should I switch my voluntary contributions to 457 instead of 403b? Or try to contribute to both? For my wife, is her only additional option contributing to a brokerage account? We are planning to start the HSA next open enrollment now that having kids should be done. Any other opinions on changes that should be made to improve the overall financial picture?

Bored and remembered this forum existed so going to update and see if anyone is still on here.
Currently 40/36, 7yo and 3yo dependents
His income: $148,500 salary hospital staff
~$2,000 in 1099 work
Her income: $138,000
~$10,000 part-time

Retirement: His - 5% mandatory 403b with 10% added by employer; $7425 plus ~$14850 by employer
$7,000 backdoor Roth
$8550 HSA
Her - 5% mandatory 403b with 10% added by employer; $6900 plus ~$13,800 by employer
$7,000 backdoor Roth
$2500 from prn job into 401k
Total: $749,271 + 495,140 + 27,200(HSA) = 1,271,611

$0 in student loans
Mortgage ~$275k ay 2.75%
No other debt
Emergency fund $40k, most in HYSA.

Any changes anyone recommends?

 

[RxPreceptor]

Bored and remembered this forum existed so going to update and see if anyone is still on here.
Currently 40/36, 7yo and 3yo dependents
His income: $148,500 salary hospital staff
~$2,000 in 1099 work
Her income: $138,000
~$10,000 part-time

Retirement: His - 5% mandatory 403b with 10% added by employer; $7425 plus ~$14850 by employer
$7,000 backdoor Roth
$8550 HSA
Her - 5% mandatory 403b with 10% added by employer; $6900 plus ~$13,800 by employer
$7,000 backdoor Roth
$2500 from prn job into 401k
Total: $749,271 + 495,140 + 27,200(HSA) = 1,271,611

$0 in student loans
Mortgage ~$275k ay 2.75%
No other debt
Emergency fund $40k, most in HYSA.

Any changes anyone recommends?

Very solid
Don’t shy away from setting up a brokerage account or making a greater priority to build on your solid bases (seems like your HYSA is getting a bit bloated) and 529s

Retirement accounts are amazing to focus on early, but as I’ve aged (roughly same age as yous) I’ve come to realize that brokerage accounts offer more freedom, flexibility to enjoy life more in your prime (no penalties, rules to follow) to spend if needed. Taxes will always be a thing

But maybe you have upcoming plans (autos, roof replacement, etc.)?

 

[Pharmist1720]

Very solid
Don’t shy away from setting up a brokerage account or making a greater priority to build on your solid bases (seems like your HYSA is getting a bit bloated) and 529s

Retirement accounts are amazing to focus on early, but as I’ve aged (roughly same age as yous) I’ve come to realize that brokerage accounts offer more freedom, flexibility to enjoy life more in your prime (no penalties, rules to follow) to spend if needed. Taxes will always be a thing

But maybe you have upcoming plans (autos, roof replacement, etc.)?

Our cars have 270k and 120k miles on them, so yeah new autos will be in our near future. We work for a university, with one benefit being reduced tuition for dependents, so we're not really looking at 529s for now unless that benefit gets changed. Thanks for the input.

 

[bluc]

Retirement accounts are amazing to focus on early, but as I’ve aged (roughly same age as yous) I’ve come to realize that brokerage accounts offer more freedom, flexibility to enjoy life more in your prime (no penalties, rules to follow) to spend if needed. Taxes will always be a thing

This is solid advice. Generally, you can’t withdraw from retirement funds until 59.5 without penalty (55 if you have completely stopped working).

Brokerage account is an option but so is rental properties. You can use depreciation to delay, even avoid, paying tax on the extra rental income.

 

[Splenda88]

Bored and remembered this forum existed so going to update and see if anyone is still on here.
Currently 40/36, 7yo and 3yo dependents
His income: $148,500 salary hospital staff
~$2,000 in 1099 work
Her income: $138,000
~$10,000 part-time

Retirement: His - 5% mandatory 403b with 10% added by employer; $7425 plus ~$14850 by employer
$7,000 backdoor Roth
$8550 HSA
Her - 5% mandatory 403b with 10% added by employer; $6900 plus ~$13,800 by employer
$7,000 backdoor Roth
$2500 from prn job into 401k
Total: $749,271 + 495,140 + 27,200(HSA) = 1,271,611

$0 in student loans
Mortgage ~$275k ay 2.75%
No other debt
Emergency fund $40k, most in HYSA.

Any changes anyone recommends?

You've won the game. Continue doing what you are doing.

As one poster above said, maybe you should have some money in a brokerage account.

For instance, my net worth is ~1.8M and 1/5 of it is in my brokerage account.

 

[Splenda88]

Very solid
Don’t shy away from setting up a brokerage account or making a greater priority to build on your solid bases (seems like your HYSA is getting a bit bloated) and 529s

Retirement accounts are amazing to focus on early, but as I’ve aged (roughly same age as yous) I’ve come to realize that brokerage accounts offer more freedom, flexibility to enjoy life more in your prime (no penalties, rules to follow) to spend if needed. Taxes will always be a thing

But maybe you have upcoming plans (autos, roof replacement, etc.)?

What do you do then since it's a tax savings vehicle? Mine has ~55k and most (~90%) of it is investing in AAPL.

 

[RxPreceptor]

What do you do then since it's a tax savings vehicle? Mine has ~55k and most (~90%) of it is investing in AAPL.

Sorry, kind of confused what you’re asking?
There are brokerage funds, options comparable to HYSAs, like SGOV and t-bills (investment platform dependent) that are more tax friendly

 

[Splenda88]

Sorry, kind of confused what you’re asking?
There are brokerage funds, options comparable to HYSAs, like SGOV and t-bills (investment platform dependent) that are more tax friendly

HSA is like 401k because it's pretax contribution. Therefore, it lowers your effective tax rate.

 

[RxPreceptor]

HSA is like 401k because it's pretax contribution. Therefore, it lowers your effective tax rate.

HYSA vs HSA…got to love finance jargon/alphabet soup and your brain, eyes omitting a single character 🤪

 

[Splenda88]

HYSA vs HSA…got to love finance jargon/alphabet soup and your brain, eyes omitting a single character 🤪

Lol.