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  • myrdale
    replied
    The automatic transfer is one I have thought about in passing, but I haven't started to look to see what is involved. For purposes of my post I was a little sloppy and rounded down. Its actually 7.5% I have been putting in. I have considered bumping that up to 10%, as you said it would be less than noticeable.

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  • disneysteve
    replied
    Something else I was going to mention, since rules of thumb have come up, is that one of them is to put at least 15% of your gross income into retirement savings. You've got 7% going to the 401k and $5,500 going to the Roth. If you make 75K, that means you're contributing 14.3% so you're just about there. If you can, up the 401k to 8% for 2019. That's only $62.50/month pre-tax so only about $45-50/month less in your take home. You likely won't even notice it. You'll thank yourself later.

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  • disneysteve
    replied
    Originally posted by myrdale View Post
    Well for better or worse I just maxed out the IRA for 2018..
    That's great. And in 2 weeks you can start funding it for 2019. Send in a monthly contribution or, even better, set up an automatic transfer to the account if you can and just forget about it.

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  • myrdale
    replied
    Well for better or worse I just maxed out the IRA for 2018.

    "Why aren't you funding your IRA on an ongoing basis during the year?...." - Disneysteve
    I am not arguing that I shouldn't, I just have not. While I'd like to think I am above average in respect to finance, I am probably closer to average than not.

    "Monthly contributions of $500 will max out the Roth" - Jluke
    Indeed, and it would hurt alot less than 15 minutes ago doing it all at once. I use the word hurt in the same way I would about a vaccine, it's still good for you.

    "It won't be in your hands anymore to tempt you to spend it on something else like a 32k truck" -Disneysteve
    I would not say having the money has been tempting me to buy the truck. I have had my eye on it for several years. It's just the last I I had gotten close I realized the house needed siding more than I needed the truck.

    "Did you used to have a mortgage payment? If so, where is the monty that used to go to the mortgage going" - scfr
    Yes. To the bank account, living expenses, siding a year and a half ago $17k, $5.5k early this year for last years IRA.

    "How are you calculating this?" - msomnipotent
    I used 12% and 30 years with $20 contribution annually for the first example, and a one time contribution of $5500 and 12%. You can argue that's too high of a rate but it was seat of the pants numbers into an online calculator on my phone. I may have screwed the maths up there. I'd have to check it again.

    "if part of your justification is that you're in it for the long haul, then prove it, starting with the vehicle you own now"
    279,000 miles and 17 years. A quick google search shows the average length of ownership of a new vehicle to be 6.5 years right now, 2 years longer than it was in 2006. I am nearly x3 the current average at the moment. Yes I'd love if the truck last another 10 years, but part of the crux is getting some value out of the resale of the truck before it is only of scrap value. Whether or not it is $2k resale to add to the $32k new truck or a $25k used truck, it's still more than $0 in say another 10 years if the engine were to fail.
    Last edited by myrdale; 12-13-2018, 04:34 PM.

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  • scfr
    replied
    [QUOTE=myrdale;n699685
    Not going for the 4 wheel drive will knock a nice chunk off. It is more a want than a need.

    [/QUOTE]

    This was going to be my suggestion. A $5K lower price almost funds the IRA for a year. Why pay $5K for something you'll use an average of maybe 1.5 times a year? If you own the truck for, let's say, 15 years, you'll "need" it 22.5 times, which means you'll be paying at least $222 for each use!! And that doesn't include the extra you will pay to insure it and get lower gas mileage (I'm assuming). Plus interest if you finance. Holy cow! Why not just rent those 1 or 2 times a year, or swap favors with a buddy, or something like that?

    And if you save on insurance and get better gas mileage and pay less interest - voila - $$ for the IRA in future years.

    I have no problem with buying a new vehicle. (We have 2 cars right now, both Toyotas, both purchased new, one we've had for 20 years and one for 9) Sometimes it makes sense. But if part of your justification is that you're "in it for the long haul" then prove it, starting with the vehicle you own now. Keep driving the truck you have since it's "running like new." Keep it for a couple more years, keep saving, keep putting money in to the IRA, wait awhile longer to buy the truck.

    On a separate note, since you know you'll be needing a new roof and A/C unit soon, why not consider that money already spent? In other words, $28K - $12K for expected major expenses = $16K in "available savings." That seems on the low side for an EF, not to mention buying a new truck.

    You mention having a paid-off house. Did you used to have a mortgage payment? If so, where is the money that used to go to the mortgage going? Could those funds go towards the new truck fund?



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  • Jluke
    replied
    Adding to Disney Steve:
    in 2019 monthly contributions of $500 (nice round $$ for a change) will max out the Roth.

    Catch up contributions are Not factored in.

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  • disneysteve
    replied
    I have a question. Why aren't you funding your IRA on an ongoing basis during the year? You're not anywhere close to the income limit so no risk of betting closed out of eligibility. And there's absolutely no benefit to waiting until February or March to put in the prior year's contribution. In fact, there's actually a downside financially speaking. It's to your benefit to fund it as early as you can. Rather than saving up in a bank account and putting in a lump sum, just make a monthly contribution throughout the year. That way the money gets into the tax shelter sooner and can start growing (hopefully) sooner and it won't be in your hands anymore to tempt you to spend it on something else like a 32K truck.

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  • LivingAlmostLarge
    replied
    I'd fund the Roth IRA because you can take out contributions so that can be your EF. What is 6 months EF? I agree that your car is past the point of investing more money. Not sure i would have spent $2k, but that's in the past. That being said Toyotas keep their value really, really well. Really well. It's hard to buy a used toyota and know that you aren't really getting a deal.

    Last December we bought a used 2015 (2 year old) toyota minivan. We paid $28k for it. I was stopping at 30k. I wanted the AWD limited package with tv. Brand new that thing was $50k. Now had I been willing to get a LE with 2wd, new I would have paid around $32k and 2 year old used 20k miles was running close to 26k so i mean why buy used? i bought with 45k miles on it and I've put on another 15k miles this year. Anyway the only way to get a deal on toyota is to compromise.

    So I can see the point of saving $6k for 2 years and 20 miles? That seems a way to me. But I didn't want to spend $50k to get my leather, awd, tv and I managed to find one. It took a few months to boot to find a less than 3 year old minivan loaded that was under $30k. The other thing is that Toyotas newer tend to be less frequent because people hang on to them. Our friends bought a 2014 toyota highlander loaded this year so 4 years old for $26k. They really hold value well.

    I'd probably just put $5500 into Roth, then save like crazy and buy your new toyota tacoma when your car needs another repair. At that time, put down what you feel comfortable with and then take out a loan.

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  • james.hendrickson
    replied
    Myrdale: This is a problem. Financial education in the USA varies a great deal => A coworker had asked if I wanted to join a football pool they were putting together for $20. I declined and when pressed why, I explained that $20 spent on a gamble per year would be $5 or $6k if invested in annual for the next 30 years. They laughed and went on their way. People just don't understand how compound interest works and how to realize it.

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  • msomnipotent
    replied
    Originally posted by myrdale View Post
    Thank you all for the feed back by the way. I actually answered part of the question myself about 15 minutes ago. A coworker had asked if I wanted to join a football pool they were putting together for $20. I declined and when pressed why, I explained that $20 spent on a gamble per year would be $5 or $6k if invested in annual for the next 30 years. They laughed and went on their way. Then it occurred to me the $5500 for the IRA is potentially $165,000 in 30 years just by itself.

    I'm getting $1,749.10 for $20 a year and $481,200.63 for $5500 yearly at 6%. How are you calculating this? Not that I am trying to prove you wrong. I'm really bad at math and have always wondered if I am calculating wrong or not. Even when I use the online calculators (as I did now), I think to myself that the numbers do not sound correct.

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  • myrdale
    replied
    Thank you all for the feed back by the way. I actually answered part of the question myself about 15 minutes ago. A coworker had asked if I wanted to join a football pool they were putting together for $20. I declined and when pressed why, I explained that $20 spent on a gamble per year would be $5 or $6k if invested in annual for the next 30 years. They laughed and went on their way. Then it occurred to me the $5500 for the IRA is potentially $165,000 in 30 years just by itself.

    To be completely honest, my intention has been to fully fund the IRA for 2018, probably in January or February of this coming year.

    Not going for the 4 wheel drive will knock a nice chunk off. It is more a want than a need.

    I do have mixed feelings about the used truck option. Its one I'd have to study. While I am not pressed to make a decision, I do feel like the current truck has passed the point on the curve where future upkeep outweighs the overall value of the vehicle. But then again it could last till 350 or 400k easily.

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  • bjl584
    replied
    Maybe meet somewhere in the middle. You can buy a used truck with 50K miles or less for half of a new Tacoma. This will leave you some cash for eventual home repairs.
    It's not the end of the world if you miss this year's IRA contribution, just don't let the reason be a brand new truck in the driveway.

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  • msomnipotent
    replied
    From what I have read, the Tacoma is due for a redesign in 2020. Usually but not always, the model year prior to the redesign is sold at a discount once the redesign comes out so you might want to wait for the 2019's. With all the work you had done, your truck should make it another year without a huge repair. You might also get a great deal now on a 2018 with it being the end of the year. Because the Tacoma is popular and the used models are selling only at a slight discount to the new ones, I would buy new with a healthy down payment. I would get a car loan considering the upcoming expenses you listed and just pay it off in 1-2 years. Keep the emergency savings for the house repairs and start a new account for the Go To Hell money.

    Why don't you just put some money in the IRA now, like half, instead of maxing out? I'm pretty sure we have until April of 2019 to add to the 2018 year, so add more before April once you figure the truck thing out. Personally, I would start increasing the 401k contribution 1% every few months. I have been raising ours 1% every 4-6 months and we don't notice it. Well, now we are starting to notice since it is now several hundred dollars a pay check more than before but we get used to the smaller checks by the time I raise the contribution again.

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  • Jluke
    replied
    One rule of thumb is 3x salary in retirement accounts by age 40. Not sure of your age. With no mortgage I imagine most of your potential savings in the last years went to paying off the house (been there done that too).

    I am a natural saver so 7% to 401k ($5k out of allowed 18.5k seems low to me but I am different).

    You have had some serious expenses for house and truck and managed that well.

    28k in the bank. I would call this the emergency fund (move to online account for 2% interest) and now start saving for your next vehicle.

    Im torn on whether the new truck is affordable for you. I would aim for a payment under $500/month and a loan of 5 years or less. Depending on interest rates.

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  • myrdale
    replied
    A few more details.

    Income is around $75k before taxes.

    For the 401K, the company matches 4% if you put 5% in. I am currently at 7%.

    $90k in the 401K

    $10k in the IRA

    $28k in savings (cash in the bank)

    I seem to average $10k+ in savings each year.

    I typically save up and try to knock out the big expenses in cash. $17k for new siding last year. $5.5k to the IRA March of this year for 2017. $2k for garage doors earlier this year. Just call it $2k for truck repairs this past month.

    "You say you're debt free, do you own your home...." Yes.

    "How much are the trucks you're considering?" $32-34k as stated in the original post.

    "Do you know the interest rate you would get?" No. I have not pulled a credit report in years, but bills are always paid on time. If I save up and pay cash interest rate is a none issue. If I pay a loan off within 2 years, again not a big issue.

    "Have you even tried shopping for a 1-2 year old car" No. I could get a used truck but I am in it for the long haul as stated in the original post. The price listed in KBB is $28-32k for 2016 model.

    "Debt free and you weren't able to come up with $5500 for an IRA" False. I could contribute the full amount at this very moment, I haven't contributed to it yet as I have been in savings mode for the past year.

    The rule of thumb I've heard in the past is your vehicle should not be more that 50% of your annual pay. By that end, $34k is at the top end of affordable.

    The trade in value for a 2002 Nissan Frontier with 279,000 miles on it I suspect is less than I spent on maintenance last month.

    The ultimate concern is balancing negating risk by having enough cash on hand, maximizing retirement, minimizing debt, and having a dependable vehicle.
    Last edited by myrdale; 12-12-2018, 08:55 PM.

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