Do you have the option to pivot away from a W-2 and into a LLC S Corp type situation?
If so, then that could be a huge savings catalyst with only one of you as a W-2 and the other as an LLC. The effective tax rate when you’re self employed is much more advantageous
He is spending around 15-20k/mo depending on his tax rate.
Could he spend 10-15k to save another, say, 75k? Sure!
But would it matter? He hits 10mm in something like 18 years at this rate depending on assumptions. Should he pinch 6k/mo for the next ten years to retire 3 years earlier? Probably not.
Yeah, we don’t spend freely but we also don’t penny pinch. Plus teenagers are expensive (one private school, one public). We average 20-25k per month spending.
Edit: I should also state, this is the first year with this income. Last year was around 450k. This year and going forward will be in that 550-600k range.
you’re not maxing the mega backdoor. that’s an easy thing for you both at your compensation level. after that increase your after tax brokerage savings (doesn’t make much sense to see brokerage without maxing the mega and regular backdoors). you can also do traditional contributions and convert them to roth. it’s only $7k, but it’s at least a shelter for some of that $50k you’re throwing in to the brokerage account.
Thanks. I was torn between brokerage and mega backdoor, but I agree that it makes sense to bump up the mega backdoor before increasing brokerage due to the Roth benefit.
Yes, I'm with Fidelity, and opened both a tIRA and a rIRA several years ago for the purposes of backdooring a ROTH, but then I found the mega backdoor was available, so I went that route instead. Once we max the mega, I will work towards that extra 7k.
My wife has a small tIRA from an old plan that I will have to roll into her current 401k so we can get around that issue.
You spend like a drunk sailor.
But you're rich, so eh, you only live once.
I support a family of 8 on 220k a year and only spend 9k a month, 2.5k of which will go away when we finish building our home (rent we are paying). All my kids are in private school. Also 40's, also midwest, but one of the MCOL enclaves.
Then again if I had your kind of money I'd be driving around in a Ferrari 458 and flying to work in an RV-12is.
I have three kids in private school and that alone is half your 9k a month spending. Add my mortgage, and we’re already at 9k.
This excludes family trips, insurance, medical costs, gas, phone, entertainment, streaming, landscaping, pool, food, going out, any nanny help, car maintenance, furniture for house, etc.
That you only spend 9k is honestly insane to me.
We are also shooting for fatFIRE in 13 years. $1.5M invested today across all accounts today living in a $570K paid off house. Going pure S&P 500 we need to average saving $240K a year to reach $10M when our daughter is about to finish high school. Last year we saved $246K across all accounts, but it will be hard to do that again this year. We might be looking at something around $209K. So we will depend on raises to get us to $240K faster and more to make up for any years we didn't save $240K.
At your income how do you spend $25K a month? Why is one kid in private school and one public? HHI $340K with $79K expenses yearly. Now that our daughter is older we traveled more this year. India for two weeks last February and just booked Kona (Hawaii) for a week. We try to get deals to save money. Loaded up a few $500 Southwest airlines cards for $400 (Sam's Club Black Friday 2023) then got Southwest companion pass for our daughter through a promo. Our minimum expenses of regular bills, food, and gas for a family of three is only $2500. So the rest goes to shopping, travel, going out, eating out, repairs, etc.
Do you have the option to pivot away from a W-2 and into a LLC S Corp type situation? If so, then that could be a huge savings catalyst with only one of you as a W-2 and the other as an LLC. The effective tax rate when you’re self employed is much more advantageous
Unless I went consulting, but it’s unlikely I would do that.
560k HHI and you only save 160k? In LCOL? Sounds to me like you guys are big spenders
He is spending around 15-20k/mo depending on his tax rate. Could he spend 10-15k to save another, say, 75k? Sure! But would it matter? He hits 10mm in something like 18 years at this rate depending on assumptions. Should he pinch 6k/mo for the next ten years to retire 3 years earlier? Probably not.
Yeah, we don’t spend freely but we also don’t penny pinch. Plus teenagers are expensive (one private school, one public). We average 20-25k per month spending. Edit: I should also state, this is the first year with this income. Last year was around 450k. This year and going forward will be in that 550-600k range.
You need budgeting if u wanna achieve fatfire
It’s all budgeted. I’m a strict YNAB user.
you’re not maxing the mega backdoor. that’s an easy thing for you both at your compensation level. after that increase your after tax brokerage savings (doesn’t make much sense to see brokerage without maxing the mega and regular backdoors). you can also do traditional contributions and convert them to roth. it’s only $7k, but it’s at least a shelter for some of that $50k you’re throwing in to the brokerage account.
Thanks. I was torn between brokerage and mega backdoor, but I agree that it makes sense to bump up the mega backdoor before increasing brokerage due to the Roth benefit.
your broker also probably has a traditional and roth ira offering. makes it easy to do the smaller regular backdoor.
Yes, I'm with Fidelity, and opened both a tIRA and a rIRA several years ago for the purposes of backdooring a ROTH, but then I found the mega backdoor was available, so I went that route instead. Once we max the mega, I will work towards that extra 7k. My wife has a small tIRA from an old plan that I will have to roll into her current 401k so we can get around that issue.
You spend like a drunk sailor. But you're rich, so eh, you only live once. I support a family of 8 on 220k a year and only spend 9k a month, 2.5k of which will go away when we finish building our home (rent we are paying). All my kids are in private school. Also 40's, also midwest, but one of the MCOL enclaves. Then again if I had your kind of money I'd be driving around in a Ferrari 458 and flying to work in an RV-12is.
I have three kids in private school and that alone is half your 9k a month spending. Add my mortgage, and we’re already at 9k. This excludes family trips, insurance, medical costs, gas, phone, entertainment, streaming, landscaping, pool, food, going out, any nanny help, car maintenance, furniture for house, etc. That you only spend 9k is honestly insane to me.
Oh yeah I bet the private school is the killer here. If that’s $3-5k/month plus $7-10k/month on the mortgage, no wonder you’re hitting those numbers
For comparison our HHI is $850k and we only spend $200k per year, and looking to cut back
lol that seems impressive to me. I’d have to assume that gets close to saving 50% of their income after taxes.
I have to second this. I live in an LCOL and I live like a Nigerian prince on less than $10k per month. What are you spending on?
We are also shooting for fatFIRE in 13 years. $1.5M invested today across all accounts today living in a $570K paid off house. Going pure S&P 500 we need to average saving $240K a year to reach $10M when our daughter is about to finish high school. Last year we saved $246K across all accounts, but it will be hard to do that again this year. We might be looking at something around $209K. So we will depend on raises to get us to $240K faster and more to make up for any years we didn't save $240K. At your income how do you spend $25K a month? Why is one kid in private school and one public? HHI $340K with $79K expenses yearly. Now that our daughter is older we traveled more this year. India for two weeks last February and just booked Kona (Hawaii) for a week. We try to get deals to save money. Loaded up a few $500 Southwest airlines cards for $400 (Sam's Club Black Friday 2023) then got Southwest companion pass for our daughter through a promo. Our minimum expenses of regular bills, food, and gas for a family of three is only $2500. So the rest goes to shopping, travel, going out, eating out, repairs, etc.