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Topics - Kzulon

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Taxes / how much traditional/Roth/Taxable?
« on: May 11, 2020, 11:43:05 AM »
Hello Jeremy,

First, I'd like to say how much I appreciate the time and effort you put into this blog. It has been an amazing resource. I was hoping you or any other followers could provide me with some advice on what my be my best plan to reach FIRE.

My current situation
Age: 26
State: FL
Gross Income: 37,550. 12% tax bracket
Occupation: Fitness trainer at NASA Kennedy Space Center

Current Asset Allocation: 90/10, 3 fund boglehead portfolio, 70/30 US/International. I currently hold the three fund portfolio in all accounts for simplicity

Current retirement assets:
HSA: $2,657.80
401K: $221.37 + 659.73 (match)
Roth401k: $1,580.81
Roth IRA: $8,501.63
Taxable: $103.95
Work plan & HSA is at Fidelity expense ratios are the underlying index funds and Roth/taxable at vanguard

Current set contributions:
HSA: 2,600, employer contributes the rest
401k: 10% with a 5% employer match (3% full dollar, 2% 50 cents to the dollar)
Roth 401k: 10%
Roth IRA: MAX 6k
Taxable account: plan to put 6k here. Putting money in quarterly when dividends are payed out into money market fund

Girlfriend
Age: 24
Gross Income: 41,000
Occupation: Contract specialist at a Private University research department
Current asset allocation: 90/10

Current retirement assets:
403B: $184.70 plus $461.76 (match)
Roth403B: $615.70
Roth IRA: $403.03

Expense ratios underlying funds plus .20% AUM for the 403b account with Lincoln, she holds just the S&P 500 index .04% here only. Roth at Fidelity 3 fund portfolio

Current Contributions:
403b: 10% (plus 6% employer match)
Roth403b: 10%
Roth IRA: $100 a month. Planned to max this out once student loans were payed off.


Our current expenses are really cheap being that we just recently graduated from college. We will be moving into a 3 bedroom apartment with roommates and paying $500 total for rent, Girlfriends student loans 10k @4% interest $100/month, and her car payment $250 a month 5 year loan @ $13,441.80. I currently pay car insurance and food related expenses.
Currently we still live at home with parents so current expenses are really low but as we transition into the apartment in July we hope to still have a minimal expenses.

Our goal is to reach FIRE by ~40-45 years old. With a portfolio that could supply 40k per year as our current target, or more if we do a good job saving :)

Initially we were going 100% Roth in both our 401s and IRAs due to the traditional rule of thumb of being low income earners but then after reading some of your blog posts about taxes and early retirement, I thought that maybe we shouldn't neglect some tax savings today.  So I added 10% traditional to both of our contribution plans at work, if my calculations were correct could get our AGI low enough for the saver's credit. I also didn't realize until reading your information how powerful a taxable account can be for someone in our tax bracket for long term cap gains and dividends.

I don't see myself having much of a pay increase in my profession unless I move up to a management role somewhere and could potentially get close to 50k a year. My GF has more potential for pay increase in the future if things workout over time.

I was hoping if you could provide some insight on what might be an appropriate split between traditional/roth/taxable for low income earners such as us?

Sorry for the novel, thank you for your time!

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