Author Archives: Mom

About Mom

A family of three living in the Pittsburgh area. We both work full-time and work on raising our daughter.

2014 Goals – Massive Fail

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I made a few goals for 2014, almost none of which worked out.  Oh well, I wasn’t expecting to pick up and move either!

Health Goals

Massive Fail here.

  • I gained 20lbs instead of losing 15: FAIL.
  •  I started out the year exercising, but then we moved, and I haven’t gotten back into it other than trying to make 10k steps per day via my Fitbit: FAIL
  • Eating 3 servings of fruits or veggies day?  Nope: FAIL  I’m lucky to get one at dinner…

Financial Goals

Technically failure, but only because we sold our house and lost that asset, although it may have been close if we hadn’t sold the house.

  • Pay off all non-mortgage debt that carries interest.  Everything but the car (at 0% interest) is paid off: SUCCESS
  • Get to 650k Net Worth.  We are sitting about 550k, which without the house is really darn good. If we hadn’t sold the house, we’d have been above 650k based on Zillow’s current estimate of our old house.  FAIL
  • Increase our assets to 1.2 million.  Without the house, we’re down over half a million.  We might have made it to 1.2 million with the house.  FAIL

Household/Parenting Goals

  • Get rid of diapers – we have stopped using her cloth diapers – they don’t fit her any more, so we’ve had to move to pull-ups for at night.  At least we’re completely out of diapers during the day with very few accidents!  I have a feeling we’ll not be buying any more pull ups though, we’re starting to have a couple of nights where she wakes up dry. We’re also not really pushing diaperless at night because of the moving. I’m gonna call this one a (technical) SUCCESS
  • Get rid of another 365 things in 365 days.  We got rid of way more, both via donations and taking things to the dump.  I am already starting a list of things to get rid of once it’s out of storage: SUCCESS
  • Finish the tile in our basement project.  I paid someone to do this, but it was done ($750 including painting!) to show the house:  SUCCESS

The good thing is that we’ve made a serious commitment to saving more for our early retirement this year.  I’ve increased my salary, we’ve upped our contributions to max out our 403(b)s in 2015, as well as contributing to an HSA and hopefully two Roths next year.  Our retirement accounts have increased significantly (from $337,687.88 in January to $423,630.36 at the beginning of December), even if our Net Worth didn’t.

Early next year, I’ll be posting my goals to fail at for 2015.  Have a happy and safe New Year!

Year End Dividends – Happy Holidays!

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Fidelity paid out their end of year distributions on 12/19 this year.  We received just over 5k in the December payouts, bringing us to a total of just over 9k of payouts for the year (vs just over 5k last year).  Unfortunately, all but $60 of that is in tax-advantaged accounts and not available to us yet.  It’s nice to know what our yearly “income” is from our investments though.

Once those payments cover our basic living expenses, we can definitely retire and never need to withdraw our principal.  Of course 9k, covers one month of expenses at the moment, but we’ll be adding more money into the account over the next ten years, and will hopefully pump that up.  In our ideal situation, the dividends/capital gains from our mutual funds completely cover our expenses, but I’m prepared to withdraw principal at a 3% rate as well.

Maybe next year we’ll get almost 20k!  I’ll be happy at 15k, but at the new rate we’re putting in money, we should see a significant increase this year.

Have a Happy and Safe Holiday Season!

Geographic Arbitrage of State Taxation in Retirement

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We’ve come into a very interesting situation since moving states: Pennsylvania taxes all contributions to a “tax-deferred” account (like a 401(k)/403(b) or Traditional IRA).  BUT, it does not tax withdrawals on those accounts.  We have about 400k that we won’t have state taxation on if we stay in the Commonwealth of Pennsylvania – AND we didn’t pay state tax in VA on that amount either.  However, over the next ten years, we’ll be paying PA state tax on about 750k of contributions to our retirement accounts.  If we then move to a state that taxes retirement withdrawals (like Virginia, Colorado, etc), we’ll end up being “double taxed” on that 750k.  If we don’t want to double pay state taxes, we’re stuck with retiring in states that don’t have an income tax or don’t tax retirement withdrawals.

However, it does present a potential for geographic arbitrage if you are so inclined – you may never have to pay state taxes on your retirement money.  Earn it in a state where you can deduct it (following federal rules), and then withdraw it in a state that doesn’t tax it.  Note, I didn’t say *spend* it in that state necessarily….  I have some ideas percolating on how to withdraw all of it prior to leaving the state of PA.  It also bolsters my argument for moving to a state like Wyoming to retire – sorry, most of the other non-tax states are too far south for my tastes!

Disclaimer: I am not a CPA, and this is just my interpretation of PA’s taxation rules.

Have you considered what moving in retirement may do to the taxation of your “tax-advantaged” money?

To rollover or not – the importance of choice and fees

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When you leave a job, you generally have the option to rollover your 401(k)/403(b) to an IRA or to your new 401(k)/403(b) plan.  In our history, I’ve always rolled over our accounts to a Fidelity Rollover IRA.  Dad and I each have one – collecting all of our previous employer plans into one.  They’re at Fidelity because that’s where my first 401(k) was and it’s been convenient.  And currently, Dad’s 403(b) and 401(a) are through Fidelity.

For the majority of my working career, I had a SIMPLE IRA through Fidelity – I was able to buy/sell *anything* Fidelity offered for a $25/year fee (plus commissions, mutual fund fees, etc).  I learned early on to just buy NTF (no transaction fee) funds and save myself that fee, but I didn’t understand mutual fund expense ratios.  I just picked what looked good and was recommended – yeah, I was naive.  Over the years though, I’ve learned better.

When my company moved from a SIMPLE IRA to a “real” 401(k), we had some pretty pathetic choices, I had already learned about mutual fund expense ratios by then, and the lowest possible fee was 0.23% for a Russell 3000 Index private fund (seriously, there was no public ticker symbol for it).  I put 100% of my money into that fund, and made up the rest of our allocation in our Rollover IRAs and in Dad’s 403(b).  What if I didn’t have another option?  I would have had to try to make up my desired allocation from high fee funds ( > 1%) and would have spent dearly for it.

Most recently, up until yesterday, we had had a 5% allocation in REITs – and Dad’s 403(b) offered a REIT fund with what I thought was a halfway decent fee: 0.77% (CSRIX).   With all of our other expense ratios being less than 0.25% (most in the 0.05-0.07% range), I was seriously considering eliminating our real estate allocation.  I did some more research on whether I wanted to keep the real estate in my allocation enough to continue paying the fee.  I also looked through Fidelity’s offerings, and found FSRVX at a 0.09% net and 0.19% gross ER – I pay .09% until Fidelity decides to not discount it anymore.  It gave us exposure to real estate for a lot less.  I sold the CSRIX shares in dad’s 403(b) account and bought FSRVX in my Rollover IRA. We have an agreement that my account maintains higher risk than his does, so I get things like REITS, small cap, emerging markets, etc and his focuses more on bonds and total market.  Since we balance our allocation across multiple accounts, it really doesn’t make any difference.

How do fees play into this?

Most people would agree that a fee of 0.19% is better than a fee of 0.77%, but by how much?  If the fund’s performance was 6% annually, then the fund with .19% fees would actually return 5.81% and the fund with .77% fees would return 5.23% – which would you rather have?  Over 10 years, that’s a huge difference.  The charts below assume a starting contribution of 10k, and no continuing contributions (meaning “the real world” has an even larger difference).

Hypothetical Growth of 10k

 

Interest Rate: 5.81 5.23
After Year: 10000 10000
1 10581 10523
2 11195.7561 11073.3529
3 11846.22953 11652.48926
4 12534.49547 12261.91444
5 13262.74965 12903.21257
6 14033.31541 13578.05059
7 14848.65103 14288.18263
8 15711.35766 15035.45459
9 16624.18754 15821.80886
10 17590.05283 16649.28946

As you can see, there’s a $940 difference at the end of ten years.  It grows to a difference of $4441 if you contribute 10k each year.  And that’s the difference of 0.58% in fees – imagine what you’re paying if you have fees over 1%!

If you have the opportunity to roll over an old workplace plan – unless you’ve got stellar choices already – it sometimes pays to do so.  Most brokerages offer rollover IRAs – pick your favorite low-fee broker and put everything together.  You’ll have access to their full range of funds, and there are very few online brokerages which don’t offer NTF funds of some sort, although Vanguard is well known for their low cost index funds (in my opinion, Fidelity’s Spartan funds are pretty darn close and not worth moving everything).  You’ll still have to pick the best options in your employer plan, but you’ll have the flexibility to buy cheaper funds elsewhere (but still tax advantaged).

And I would be remiss in not mentioning this, but if you have a rollover IRA hanging around – I really don’t recommend trying a backdoor Roth, you’ll get royally screwed on taxes.  This disadvantage can be overcome by rolling any IRA you have into a current employer’s plan.

Cash Back Shopping Apps

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And I don’t mean the credit card kind.  I mean the apps that are available like ibotta, checkout51 and Walmart’s new Savings Catcher.

I don’t earn a lot, but in the last few months, I’ve earned about $20 between the three of them.  Sometimes, I earn a “cash back” on one item multiple times through the different apps – it depends on what it is.

Ibotta especially focuses on name brand items, but occasionally has “generic” items available, like milk, bread and eggs.  Checkout51 pretty reliably has bananas every week, as well as the occasional milk and bread. Ibotta is store specific, ALDI’s isn’t an option there, but Costco (and the local liquor store) is.  Checkout51 doesn’t care where the receipt is from as long as it’s pretty obvious that you bought the item in question.

The WalMart Savings Catcher is a relatively recent addition to my phone – it “scans” through published ads and matches them to items on your receipt – so you don’t have to remember your ads or remember to ask them to match.  From what I can tell, it doesn’t cover WalMart’s entire ad matching policy (doesn’t allow non-branded items like produce and meat), but it gets the rest.   Other than Costco, WalMart is my primary grocery store, so it was worth looking at (and I can still get ibotta/checkout51 rebates on the same receipt).

I’m not hugely brand loyal, so I don’t get a lot of money from these things, but if you are brand loyal or even brand agnostic, you might be able to “make” more than I do.  I don’t even bother to look at the apps until after I’ve already purchased my groceries, so I don’t tailor my shopping to meet their lists. I get the brand I want or the cheapest option – the 25-50 cents that I get from the apps doesn’t make up for the price differences usually.

Disclaimer: I just use these apps, I have no affiliation with them in anyway.  I also know that they are recording what some people refer to as sensitive information, and folks aren’t OK with that.  As I see it, the stores can already trace my purchases back to me via my credit card, so it’s not a privacy issue for me.

Does anyone else use the cash back shopping apps?  Or am I the only one willing to take pictures of my receipt and scan barcodes for some cash back?  Any other apps I should look at?

Detailed Financial Picture – December 2014

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November’s Numbers

As of December 4, 2014, we are $14,000 in debt without a mortgage to speak of (yet).  We currently have $536,285.88 in assets.  Our investment accounts are at $423,630.36. Our Net Worth is $522,285.88, up from $504,813.87 last month (3.46% increase).

November was a relatively quiet month.  We spent more than usual because we bought all our Christmas gifts (but it was only about $600 more than usual), but still quite low spending for us (yay no house!).  We’re paying storage fees at the moment, and our mortgage plus “escrow” will be almost twice the storage fees.

Dad had his annual review a few days ago and will be getting a nice  bonus and 2.something% raise.  We might open a Roth for 2014 for him if our AGI allows us to.  Or we might use it to fully fund our HSA at the beginning of the year.  Dad doesn’t get to contribute to his HSA via payroll deductions, so we have to manually contribute after-tax dollars and then claim the deduction on our taxes.  I’m debating on whether to contribute to the HSA his company uses (Optum bank) or open our own separate one for our contributions.  We can’t get access to the investment options or documents until we open the account, and we can’t open the account until 2015 when we’re covered by the new plan – not that I’ve been able to find anyway. Anyone have an HSA “bank” they’re particularly happy with?

Debt (in the order we’re paying it down):

  • Line of credit (8.75%): $0.00
  • Chase (4.99% for life): $ 0.00 
  • Student loans (aggregated 4.21%):  $0.00 
  • Car loan (0%): $14,000 (-500.00)
  • Mortgage (4.125%): $0.00 

Total paid off in November:  $500

November 2014 Early Retirement Progress

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GOAL!

We contributed $4,817.72 this month to our retirement accounts  We gained $6,479.76 in investment gains this month. 

We’ve now contributed over our annual goal of $40k into our accounts – one month early.  One big thing that helped us is that my company match changed from 4% to 8%.  The other thing that helped is that both Dad and I are now maxing out our 403(b) plans.

I learned something interesting during open enrollment for Dad – he has a “mandatory” 2% contribution to a 401(a) plan – and it doesn’t count “against” the IRS limit of 17,500 (for 2014).  The IRS limit is for “elected” contributions, and the 2% isn’t elective, so he’s really getting to put aside almost $20,000 through his company’s plan this year.  We just clicked the “take the maximum out” checkbox in February and left it at that.  And as of January 1, 2015, he’ll be fully vested in his 401(a)/403(b) plans.  I still have to wait three years to be vested in my 8% match.

Next year, we’re hoping to contribute up to $70k via company plans, Roths, an HSA and our taxable accounts.  We *might* squeak out $75k.  I’m inordinately excited about how much we can save towards our retirement next year! That makes me weird in a good way right?

2014 Totals

So far, for 2014, we’ve contributed $40,891.98 (102.23% of our goal of 40k), and we’ve made $32,079.22 in investment gains (158.33% of our planned total).

Thanksgiving

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This time of year is when most people wax nostalgic about what they are thankful for – aren’t we thankful the other 364 days of the year?  Not that I’m any different, but Thanksgiving reminds us to be actively thankful, and tell those people we’re thankful for what they mean to us.

This year, I’m thankful for the opportunities I’ve been given to change our lives and make a new start.  I’m thankful for my support system (Dad and my mom) for helping see me through my Post-Partum Depression and the stresses of moving.  And I’m thankful to Daughter Person for making me a mother – one that I hope she will appreciate in the years to come and as she becomes a mother herself.

This year has been long and difficult, and we still have to live at my mom’s until at least March, but I’m thankful that I have a mom to annoy me and drive me bonkers.

I’m also thankful for the community of bloggers that I’ve gotten to know in the last few years.  Good luck to each and every one of you on your journeys to wherever you wish to go.

Now go out and tell your loved ones why you are thankful for them.

Milestone in my Taxable Account

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I finally hit a milestone in my taxable account: enough money to buy into a mutual fund.

I had previously been buying ETFs 1-2 shares at a time, leaving anywhere from $20-$80 in cash, and not really working for me.  Today, I deposited enough to bring me above the magic $2,500 for FSTMX.  I left my two “raw” stocks (MCD, ADM) invested because they would cost me ($7.95 each trade) to get rid of them, and they’re throwing off (small) dividends.

At the end of the day, Fidelity will have me owning just over $2600 in FSTMX.  I’ve changed my auto-transfer from my bank account to an auto-purchase of the fund as well, so that’ll continue to keep growing. The auto-investment ability into the mutual fund is what decided me.  I can “set it and forget it” to a certain extent.

I had a devil of a time picking between FSTMX and FUSEX. Similar expense ratios (0.10% gross, .10% and .095% net), FUSEX throws off more dividends, but it’ll mean the difference of $10/year for me at my level).  What really made the decision for me was that FSTMX is total market rather than just S&P500, and FSTMX only has 1% turnover vs the 3% of FUSEX.  In a taxable account, that can be a big difference.

This money is nominally earmarked for retirement, but could be used for other goals as they come up.  The goal is to build this account up enough to survive from when we retire at about 50 to 59.5 when we can start withdrawing from our tax-advantaged accounts without penalty – we have a long way to go!

Next milestone?  $10,000 to get into the advantage class of shares (FSTVX)!

Do you tend to invest in mutual funds or ETFs?  Why?

Framed House

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Framed House

Framed House

We obviously have an extremely fast framing crew – apparently, we were assigned the Amish framing crew (which means quickly and high quality).  This picture was almost exactly one week after the previous picture with just the foundation.  I know the majority of the walls were delivered already put together, but I think this was *fast*.

They’re still telling us that we can move in at the end of March – based on what I’ve seen, we might be moving earlier, but I don’t know anything about building houses.  My guess is that they’re working extremely quickly to get the houses under roof and with the siding on before the weather turns too bad, then progress will slow down a bit.  The day before and the day after this picture was taken, there was a dusting of snow on the ground (not for long).

There’s already one mistake on the house (a missing window on the right side), and I’ve reported it to the sales guy and production manager – in writing.  They knew about it, and they expect it’ll be fixed in the next two weeks – as soon as the window arrives.  That’ll be interesting to see how they just cut a hole in the framing and put a window in.  I wonder if they’ll try to put the siding on that side last.  There are a few other places I’d like to see windows (like the two front upstairs bedrooms), but they weren’t options, so those’ll have to wait until it really bothers me to do something about.