- November 25, 2023
- Posted by: legaleseblogger
- Category: Related News
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Financial Planning and Savings Strategy for Long-Term Success
Expanding Financial History
As I am new to financial planning, I am eager to secure a stable retirement and improve my overall financial literacy. During the first 8 years of my career, I earned an annual income of approximately $135,000. However, I only contributed 3% of my company’s matching 3% to my 401k. Additionally, I took out a $19,000 loan from my 401k to assist with a home down payment, which I now recognize as a mistake. My current 401k balance stands at approximately $49,000. I also have a mortgage of $3500 per month, inclusive of utilities, property tax, and HOA fees, and an average monthly credit card spending of $4,000. The card is utilized for all bills, subscriptions, and car payments.
Recent Financial Adjustments and Upcoming Plans
Fortunately, I have secured a new job with a salary of $210,000, and I have adjusted my 401k contribution to 15%, with a 4% company match. After a tax rate of about 25-30%, my after-tax income totals $9,500 per month. Additionally, I transferred my savings of $30,000 to a High Yield Savings Account (HYSA) rather than leaving it in a low-interest credit union savings account. I am also putting away $1,000 per month for emergency purposes. Next year, I plan to start contributing to a traditional IRA account. However, this year, I am focusing on saving for a wedding, setting aside an additional $800 per month on top of the emergency savings account. I do not currently have any other investments established, and I feel that I am playing catch-up due to the mistakes I made in my younger years. The only remaining debt I have is $30,000 in school loans, which will be fully reimbursed by my employer.
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Conclusion
In summary, I am seeking guidance on how to better set myself up for success and effectively maximize my savings. With the assistance of AI Legalese Decoder and its advanced capabilities, I aim to receive personalized financial advice and create a solid roadmap for achieving my long-term financial goals.
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You make a good income, so itÔÇÖs not too late. As the other posted stated, max out your 401k and try to back door Roth as much as you can.
I actually have a pretty similar situation to you, with the same base pay and almost the same expenses. If itÔÇÖs helpful, annually I am able to max my 401k, save ~$25k back door Roth, and save ~$30k towards a down payment (still renting unfortunately).
No I didn’t have a dime saved until I was like 32.
You’re way ahead and I’m shooting for 800k-1mil, which isn’t as much as i’d like but im doing the best I can.
Beauty of hitting 30: You get to realize the mistakes of your 20s and you still have plenty of time to correct them.
It sounds to me like the biggest thing you need is a financial plan. Read some financial literacy books, and maybe give The Money Guys on YouTube a look.
Thanks to your income you have the opportunity to do better than most, as long as you keep your expenses under control. Definitely far from too late.
That income also disqualifies you from IRA by the way. (You could contribute $6500 to a regular IRA but it wouldn’t be tax deductible, and you’d pay tax on the gains again on withdrawal – very likely not worth doing.)
You could make backdoor Roth contributions though. $6500 via regular IRA (immediately transferred to Roth IRA), and another $30k+ via mega backdoor if your employer’s 401k plan supports it. (The feature would be called something like in-plan after-tax 401k Roth conversion or something like that.) Those are absolutely worth doing for any retirement savings before saving anywhere else, because they completely eliminate taxes on gains. That can easily put you ahead 50% or so over a few decades.
1. Max out 401k every year
2. Max out IRA every year, possibly backdoor Roth IRA depending on your income.
3. Max out HSA every year if youÔÇÖre enrolled in a HDHP.
4. Invest the remainder into a taxable account.
Just an fyi. The limit for 401k contributions is 22,500 (not including employer match) annually. Sounds like you might be exceeding that with that 15% contribution.
Definately not to late. I f’d up worse than that. My employer didnt match so I stupidly didnt contribute. I didnt catch on until I was 36 and I didnt REALLY catch on until recently in my 40s. I bought a house at 35 and you already have one. Looking at the math I feel like Im still going to be just fine and you have a 10 year headstart on me.
I currently have 110k in my 401k at 44. At 30 I was making I think either 45k or 60k and I wasnt putting anything into a 401k or IRA.
Projecting that my wife and I will have $2M at age 55
If it makes you feel any better, for the first 10 years of employment my job didnÔÇÖt offer a 401K. I went back to get my MBA in my late 20s and basically restarted my career from scratch at age 30 with $20K in a Roth IRA, no emergency fund, and no college savings in place for my young child. Life is volatile and things are almost never as you read in financial planning guides. The good news is thereÔÇÖs always a chance to course correct.
Yea you made some mistakes but good thing is your definitely not too late. First thing you need to do is drop your percentage of 401k to 11%. At 15%, you will hit your cap sooner than later unless your ok with that. IÔÇÖd prefer to spread it out evenly throughout the year. That should bump up your take home a couple hundred as well. Outside of that, you can do a brokerage account if you want. With just your 401k maxed with match, your saving over 30k a year. If you retire at 60 and earn a inflation adjusted 7%, youÔÇÖll have 4.3 million in there. At a 4% withdrawal rate, that would pay you 172k a year starting at 60. Your doing great! Keep it up!
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>Is it too late for me (30 F)?
Definitely not!
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>How can I better set myself up for success and maximize my savings?
Mainly, live below your means, stay out of consumer debt (aside from mortgage), invest as much as you reasonably can as often as you can.
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[https://www.etf.com/docs/IfYouCan.pdf](https://www.etf.com/docs/IfYouCan.pdf)
[https://www.bogleheads.org/wiki/Prioritizing_investments](https://www.bogleheads.org/wiki/Prioritizing_investments)
[https://www.bogleheads.org/wiki/Tax-efficient_fund_placement](https://www.bogleheads.org/wiki/Tax-efficient_fund_placement)
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[https://www.madfientist.com/traditional-ira-vs-roth-ira/](https://www.madfientist.com/traditional-ira-vs-roth-ira/)
[https://www.bogleheads.org/wiki/Traditional_versus_Roth](https://www.bogleheads.org/wiki/Traditional_versus_Roth)
[https://thefinancebuff.com/case-against-roth-401k.html](https://thefinancebuff.com/case-against-roth-401k.html)
[https://moneywithkatie.com/blog/the-final-traditional-vs-roth-debate-traditional-wins](https://moneywithkatie.com/blog/the-final-traditional-vs-roth-debate-traditional-wins)
[https://wantfi.com/skip-the-roth-ira-and-401k-pay-less-tax.html](https://wantfi.com/skip-the-roth-ira-and-401k-pay-less-tax.html)
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[https://investor.vanguard.com/investor-resources-education/education/model-portfolio-allocation](https://investor.vanguard.com/investor-resources-education/education/model-portfolio-allocation)
[https://www.optimizedportfolio.com/lazy-portfolios/](https://www.optimizedportfolio.com/lazy-portfolios/)
[https://www.lazyportfolioetf.com/](https://www.lazyportfolioetf.com/)
[https://portfoliocharts.com/2021/12/16/three-secret-ingredients-of-the-most-efficient-portfolios/](https://portfoliocharts.com/2021/12/16/three-secret-ingredients-of-the-most-efficient-portfolios/)
[https://portfoliocharts.com/portfolios/](https://portfoliocharts.com/portfolios/)
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I have no 401k and my wifeÔÇÖs 401k is like 25k and I canÔÇÖt afford to increase as I have two dependents you are doing better then you think.
Not at all too late. Good luck.
I think you deserve a lot of credit. The half backed job so far is light years better then the majority of Americans. What is even better is that you are so young and you are taking action to improve your finances. YouÔÇÖre already a success. Keep building your financial knowledge.
My basic starting frame work if itÔÇÖs of any use:
Spent some of your money (very limited) Good to maintain your physiology around finances. Being to tight is also a detriment.
-Never bring liquid cash to zero, ever.
-Absolutely No BS debt – ie expensive cars, credit cards to buy consumer crap only poor people buy.
-Invest
-Save only to a point to cover or hedge for the slow times.
I also physically hold a limited amount of physical cash. 1-3k or so.
YouÔÇÖre 30 and are doing infinitely better than most. You also make high income and are catching up. For comparison, IÔÇÖm 44 and have 60k saved despite having a high income. Divorce is a bitch.
What stands out to me is your expenses. IÔÇÖm going to assume you have 3-6 years of equity in your home and that payment is substantial. Also, $4k a month in spending is also substantial. That leaves you $2k a month for saving/retirement/emergencies. That seems very low for your income. I make 120k and am socking away $3k a month for comparison.
I would consider selling your home and downsizing. Keep your payment under $2500/mo if you can. Then work on your expenses. IÔÇÖm sure you can easily cut $500-1000 there. I know thereÔÇÖs a ton of variables behind the home, and you probably have a low interest rate, but that makes the payment even more troubling to me. I feel you overextended yourself on the house but thatÔÇÖs just me.