2017 Planning

I have a decent emergency fund and pretty low expenses.  Time to rehash what I want to do for 2017.

  • max out 401k $18000
  • max out IRA $5500
  • max out HSA $3350
  • =$26,850

If I only save $5k a month for the rest of the year.  Let’s say I start in August and everything before that is just held in an emergency fund.

=$25k

So I won’t quite make it, but I can make some of that up in 2018 easily enough.  Saving $5500 a month would do it.  And the whole time I’d have ~$12k in emergency savings.  Not bad.

Another thing I’m thinking about doing is killing my storage unit.  This is both so that I’m forced to spend some time becoming more of a minimalist and also to kill another $130 in fixed costs a month.  I can save around $200 a month total if I get rid of the storage unit and downgrade my Internet / phone to bandwidths that I actually use.

Downsizing will take time and be a big pain in the ass.  I have 11 tubs of books, 6 tubs of RPG books, and at least another 6 tubs of collectibles.  I also have 2 closets full of clothing where for sure I only need one.  Many of the books are fantasy / scifi paperbacks that take up space but aren’t worth much.  Maybe the most expedient thing to do is to sell them in series sets.  Maybe it’s not even worth it and I should just drop them off at a used book store.

If I had a larger place, I’d want to keep them in a library.  But I realize that this physical stuff in my life takes up more of my time and energy than I want, and I need to let it go so that I can move more easily and be less anchored in stasis.

2017 is basically a wash b/c all this stuff is getting absorbed by retirement accounts.  2018 is more sunny.  I can save around $3500/month even beyond the retirement stuff.  By mid 2018 I’d have $21k.  By the end of the year, $42k.  Including my current savings, $54k.  Even if we say $14k of that is consumed by travel and bullshit, $40k isn’t bad.

Net worth would be around $600k.

Allright, back to 2017.  If I’m starting in August, I have 10 paychecks for the rest of the year.  That means $1800 per paycheck goes to 401(k).  $550 goes to IRA.  $335 to HSA.  Only 401(k) has to be coordinated with payroll.

Due to my high tax bracket, I’m a little torn about whether to do Roth 401(k) or not.

Roth:

  • Put in $18,000
  • Pay $10,708 in taxes on that $18000.
  • Later, I can get out the $18k with no taxes.
  • $28708 of total pre tax money.

Traditional:

  • Put in 18k of pretax money.
  • Have $10708 more pretax money.
  • This will be taxed at 37.3% ($3994) and then I take home $6714.
  • Later, if I withdraw the $18k I have to pay taxes.
  • If it’s the same tax rate, we’re talking $11,286.
  • 11,286 + $6714 = $18,000

So…

  1.  That $6714 would need to be invested for any of this to be comparable.  It would be in a taxable account.  What kinds of investments am I likely to make right now?  Are they taxable?
  2. Do I want the flexibility of having that extra $6714 around?
  3. Do I believe the retirement account investments will do better than real estate investments?
  4. Do I believe the future tax rate will be above or below 37.3% (different state, different time)?

If my plan was to buy real estate somewhere else and retire early on a lower income, then the traditional is the way to go.  If I plan to stay in CA and build up a super high income later in my life, then the Roth is the way to go.

If I sell a bunch of stuff, I can probably get at least another $50k into savings.  That would put me closer to $650k net worth by the end of 2018.  If the housing market holds up, I’d be within striking distance of retirement by then.  If I setup a webstore and can also sell things other than what I already own, it may even put me in a position to quit earlier w/out needing to sell the condo to be independent.

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