Hi Money Minder,
What’s up, peeps? I need some advice from all you smart money minds out there. I’ve been adulting pretty well so far – got my finances in order, budgeting like a boss, and stacking up those savings. Spent my 20s hustling in the corporate world and juggling side gigs to get where I am now, and now I’m ready to kick back a bit and make my money work for me. Tried out a financial advisor, but it felt like I was paying for someone to tell me to stick to my budget.
So, if you were in my shoes, what would you do?
Here are my thoughts:
- Merge my old retirement accounts into one IRA. Traditional or Roth?
- Can I max out contributions to both a Roth IRA and employer-sponsored Roth?
- Should I switch from employer Roth to employer 401k to meet income requirements for a Roth IRA? Then max out both annually?
- Open a brokerage account, invest in VTSAX/VOO, and chill?
Personal Deets:
- 32 and fabulous
- Lady boss
- No spouse, no kids
- Stateside, no state income tax
- Main gig: $146,000 a year pre-tax + variable bonus (~2-5K post-tax)
- Side hustle: ~$3000 yearly
Money Goals:
- Live that debt-free life
- Financial freedom – no money stress, but still some fun spending
- Travel twice a year, mini vacays four times a year
- Eat out/have fun 2-3 times a month
Retirement Plan:
- “Retire” from the corporate world at 40, start my own biz (maybe wellness or tourism), take a 50% pay cut
- Or chill in a corporate job till full retirement
- Fully retire between 55-62
- Start collecting Social Security at 67
Debt:
- Mortgage
- Owes ~$325,000
- Interest: 5.875%
- Monthly payment: $2,360
- Car
- Loan: ~$24,000
- Interest: 6.95%
- Monthly payment: $429
- Monthly expenses: ~5-7K, incl. mortgage/car
Current Investments:
- Old employer 401k: ~$30,000
- Other old employer 401k: ~$50,000
- Roth & 401k from past employers: ~$15,000, ~$5,000, ~$2,000
- Current employer Roth: ~$85,000
Company Stock: Might be worth a pretty penny when it vests in 2026
Cool stuff: Antique books and artwork
Current Savings:
- Emergency Fund: 30K
- Savings: ~33K for house stuff, travel, etc.
Catch ya later!
Response from THE MONEY MINDER:
Hello There,
Congratulations on building such a strong financial foundation! It’s evident that you’ve put in a lot of hard work and dedication to get to where you are now. Considering your personal and financial goals, here are some practical steps you might want to consider:
Firstly, consolidating your old retirement accounts into one IRA is a smart move. In deciding between a traditional IRA and a Roth IRA, it’s essential to consider your current tax situation and your retirement goals. Given your income level, you might benefit more from contributing to a traditional IRA to lower your taxable income now. However, if you anticipate being in a higher tax bracket in retirement or want tax-free withdrawals later on, a Roth IRA could be a better fit.
Secondly, maxing out both annual contribution limits to a Roth IRA and an employer-sponsored Roth sounds like a great idea. By doing this, you’re taking advantage of tax-free growth and withdrawals in your retirement years. If switching to an employer 401k helps you meet income requirements for a Roth IRA, it might be worth considering. This strategy could also diversify your tax treatment in retirement, providing flexibility when it comes to withdrawals.
Opening a brokerage account and investing in VTSAX/VOO could be a good way to further diversify your investment portfolio, especially if you’re looking for long-term growth. These index funds are low-cost and provide broad exposure to the stock market, which aligns well with your goal of financial freedom and retirement planning.
Considering your financial goals, debt, and investments, it’s clear that you have a solid grasp of your finances. By continuing to focus on debt-free living, maximizing your retirement contributions, and investing wisely, you’re setting yourself up for financial success in the future.
Remember, it’s always a good idea to regularly review and adjust your financial plan as needed. Stay focused on your goals, keep building on your solid foundation, and you’ll be well on your way to achieving the financial freedom you desire.
Best of luck on your financial journey!
Warm regards,
THE MONEY MINDER
