Investing General Discussion

Foler

The_Black_Log Foler

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Im curious, everyone says max your 401k, Roth etc. This makes sense on paper. However how do people make big financial purchases prior to age 59.5? I’m under the assumption that for the majority of folks that are maxing their tax-advantaged accounts probably don’t have a lot left over to invest after-tax once expenses are taken care of. I get the idea of having a comfy retirement but what about the in between? This may not be as big a question for some of you guys closer to 59.5.

Is there some magic 401k number you reach where you start to taper down your annual contributions in favor of taking that money after-tax and investing it to have on hand for shorter time horizon or to put towards expenses/assets such as a home, vacation, land, etc?
 
Araysar

Loser Araysar

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Foler said:
Im curious, everyone says max your 401k, Roth etc. This makes sense on paper. However how do people make big financial purchases prior to age 59.5? I’m under the assumption that for the majority of folks that are maxing their tax-advantaged accounts probably don’t have a lot left over to invest after-tax once expenses are taken care of. I get the idea of having a comfy retirement but what about the in between? This may not be as big a question for some of you guys closer to 59.5.

Is there some magic 401k number you reach where you start to taper down your annual contributions in favor of taking that money after-tax and investing it to have on hand for shorter time horizon or to put towards expenses/assets such as a home, vacation, land, etc?
Click to expand...

Assuming you're in your 30s-40s, what is there to buy after you buy a house and 2 cars? Everything else is just investments at that point
 
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Gravel

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Foler said:
Im curious, everyone says max your 401k, Roth etc. This makes sense on paper. However how do people make big financial purchases prior to age 59.5? I’m under the assumption that for the majority of folks that are maxing their tax-advantaged accounts probably don’t have a lot left over to invest after-tax once expenses are taken care of. I get the idea of having a comfy retirement but what about the in between? This may not be as big a question for some of you guys closer to 59.5.

Is there some magic 401k number you reach where you start to taper down your annual contributions in favor of taking that money after-tax and investing it to have on hand for shorter time horizon or to put towards expenses/assets such as a home, vacation, land, etc?
Click to expand...
It's not really a ton of money between maxing an IRA and 401k. I think it's $30k this year? What big financial purchases are you talking about?

My wife and I would max them out and then we started shoveling money into a taxable account. We were never big earners (I've mentioned before that our average income was something like $60k combined, and our top year was about $185k) and we still bought a house, paid for cars in cash, etc.
 
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OU Ariakas

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Gravel said:
It's not really a ton of money between maxing an IRA and 401k. I think it's $30k this year? What big financial purchases are you talking about?

My wife and I would max them out and then we started shoveling money into a taxable account. We were never big earners (I've mentioned before that our average income was something like $60k combined, and our top year was about $185k) and we still bought a house, paid for cars in cash, etc.
Click to expand...

I admire the discipline that you and your wife have to be able to live below your means with a shared goal in mind.
 
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Fogel

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Gravel said:
It's not really a ton of money between maxing an IRA and 401k. I think it's $30k this year? What big financial purchases are you talking about?

My wife and I would max them out and then we started shoveling money into a taxable account. We were never big earners (I've mentioned before that our average income was something like $60k combined, and our top year was about $185k) and we still bought a house, paid for cars in cash, etc.
Click to expand...

Yeah but how many Stanley's does your wife have!?
 
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Gravel

Gravel

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OU Ariakas said:
I admire the discipline that you and your wife have to be able to live below your means with a shared goal in mind.
Click to expand...
It's all about delayed gratification. And/or the hedonic treadmill (hedonic adaptation).

A lot of the times I'll want to buy something, but I wait a week. Turns out I didn't actually want it.

The hedonic adaptation part is actually probably more relevant. When you realize that you buy something and get that rush of endorphins, and then look to see how long that lasts. You eventually realize that it fades very fast and whatever it was that you bought doesn't bring you any happiness/joy or whatever you want to call it. It just becomes a thing that takes up space and 10 years from now you throw it out wondering why you bought it in the first place. So you stop trying to just buy trinkets to make yourself happy. Women are way worse about this. They'll go shopping and just start grabbing shit because "new" is exciting.

My wife is great at this. She doesn't bother much anymore, but she'd go shopping, grab a bunch of shit she wanted, and then not buy any of it.
 
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Aldarion

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Gravel said:
It's all about delayed gratification. And/or the hedonic treadmill (hedonic adaptation).

A lot of the times I'll want to buy something, but I wait a week. Turns out I didn't actually want it.

The hedonic adaptation part is actually probably more relevant. When you realize that you buy something and get that rush of endorphins, and then look to see how long that lasts. You eventually realize that it fades very fast and whatever it was that you bought doesn't bring you any happiness/joy or whatever you want to call it. It just becomes a thing that takes up space and 10 years from now you throw it out wondering why you bought it in the first place. So you stop trying to just buy trinkets to make yourself happy. Women are way worse about this. They'll go shopping and just start grabbing shit because "new" is exciting.

My wife is great at this. She doesn't bother much anymore, but she'd go shopping, grab a bunch of shit she wanted, and then not buy any of it.
Click to expand...
Living a large fraction of my life in poverty immunized me to this. I only recognize what you're talking about because I've heard other people talk about it.

When I buy something - literally anything without any exceptions at all - my immediate reaction is fuck, I should have spent less, that was a mistake and I'm an idiot for spending that money.

I have literally never experienced this "rush from buying new stuff" and it took me a long time to learn that other people do. it still makes zero sense to me, but I at least recognize now that its a thing.
 
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Gravel

Gravel

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That's the hedonic adaptation part of it though.

Most people can relate to the "live like a college kid" mentality. Eating ramen, etc. Then people get a job, buy something expensive (TV, car, whatever). And that become the norm. That's the adaptation part. And then you buy more shit. Maybe it's keeping up with the Joneses. Whatever it is, people lifestyle inflate repeatedly and adapt to that new level of consumption and waste. It doesn't stop until you make a decision to stop it, or you get into trouble financially. It's why US debt is always reaching new highs.

The entire US economy is built on this debt cycle of more and more.
 
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fris

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Retail therapy. I have it, but as bad as others but it's there. Years ago, I molded that into debt and then retirement spending. Oh duck yeah, your gonna get me outta debt. jpg
It took a minor step back 2 years ago when I maxed my Roth IRA on Jan 1 and dumped 90% of it into a broad fund and then Joe Biden happened.
 
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Mist

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fris said:
Retail therapy. I have it, but as bad as others but it's there. Years ago, I molded that into debt and then retirement spending. Oh duck yeah, your gonna get me outta debt. jpg
It took a minor step back 2 years ago when I maxed my Roth IRA on Jan 1 and dumped 90% of it into a broad fund and then Joe Biden happened.
Click to expand...
So, you tried to time the market with a lump contribution at an ATH but it's Joe Biden's fault.
 
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Sanrith Descartes

Sanrith Descartes

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Foler said:
Im curious, everyone says max your 401k, Roth etc. This makes sense on paper. However how do people make big financial purchases prior to age 59.5? I’m under the assumption that for the majority of folks that are maxing their tax-advantaged accounts probably don’t have a lot left over to invest after-tax once expenses are taken care of. I get the idea of having a comfy retirement but what about the in between? This may not be as big a question for some of you guys closer to 59.5.

Is there some magic 401k number you reach where you start to taper down your annual contributions in favor of taking that money after-tax and investing it to have on hand for shorter time horizon or to put towards expenses/assets such as a home, vacation, land, etc?
Click to expand...
It isnt a cookie cutter answer unfortunately. Its really based on lots factors for the individual. Tons of variables.
Are your kids set (good jobs, families etc) financially? If not, are they college age/starting out and will need help. If they are set and independent, then how much are you looking to pass along to inherit.
Are you currently living a lifestyle you enjoy?
Do both husband and wife work? If one is a stay-at-home spouse, they may have different ideas about life fulfillment since they dont have the job to provide this.
How much do you work? If you are a 9/5 40 hour guy, then many of them can find their fun on the weekends and be happy. if you are the 7 day/80 hour a week guy, then odds are you dont have a lot free time to be spending.

Everyone is different so the answer is different for each of them.
 
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Foler

The_Black_Log Foler

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Araysar said:
Assuming you're in your 30s-40s, what is there to buy after you buy a house and 2 cars? Everything else is just investments at that point
Click to expand...
Ya that checks out. I think maybe vacations may be the only other large expense outside maintenance/enhancements of what you just mentioned.
 
Foler

The_Black_Log Foler

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Gravel said:
It's not really a ton of money between maxing an IRA and 401k. I think it's $30k this year? What big financial purchases are you talking about?

My wife and I would max them out and then we started shoveling money into a taxable account. We were never big earners (I've mentioned before that our average income was something like $60k combined, and our top year was about $185k) and we still bought a house, paid for cars in cash, etc.
Click to expand...
I thought the max was like 60k but maybe that is just for the mega back door Roth which is what I’m doing. 30k then ya I can see that. Good for yall.
Sanrith Descartes said:
It isnt a cookie cutter answer unfortunately. It’s really based on lots factors for the individual. Tons of variables.
Are your kids set (good jobs, families etc) financially? If not, are they college age/starting out and will need help. If they are set and independent, then how much are you looking to pass along to inherit.
Are you currently living a lifestyle you enjoy?
Do both husband and wife work? If one is a stay-at-home spouse, they may have different ideas about life fulfillment since they dont have the job to provide this.
How much do you work? If you are a 9/5 40 hour guy, then many of them can find their fun on the weekends and be happy. if you are the 7 day/80 hour a week guy, then odds are you dont have a lot free time to be spending.

Everyone is different so the answer is different for each of them.
Click to expand...
Yeah that makes sense. Kids come into the picture and that changes things. College funds, school tuition, etc. thanks
 
Araysar

Loser Araysar

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Foler said:
Ya that checks out. I think maybe vacations may be the only other large expense outside maintenance/enhancements of what you just mentioned.
Click to expand...

Last vacation we threw on credit cards for points and then paid it off when we came back.

I think the next big purchases for us are going to be home improvement stuff like new floors or a backyard sauna for me. I'll just pull money out of my trading acct when I'm ready to do it.

Otherwise, I have no interest in boats, electric luxury cars, giant trucks or whatever dumb shit that men my age like to spend money on. It all sounds like a chore
 
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Furry

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Araysar said:
Otherwise, I have no interest in boats, electric luxury cars, giant trucks or whatever dumb shit that men my age like to spend money on. It all sounds like a chore
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Boats are awesome. I mostly charter them/day trip whatever, because I love sailing. Have no intention to actually own one until I retire. They are a chore, but having a big chore once you're retired stops you from becoming a senile chair potato.
 
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fris

fris

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Mist said:
So, you tried to time the market with a lump contribution at an ATH but it's Joe Biden's fault.
Click to expand...
More tongue in check, but yes, I had the funds to fully fund my Roth on Jan 1 and it was the worst Jan in years to do so.
 
Araysar

Loser Araysar

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Furry said:
Boats are awesome. I mostly charter them/day trip whatever, because I love sailing. Have no intention to actually own one until I retire. They are a chore, but having a big chore once you're retired stops you from becoming a senile chair potato.
Click to expand...

Boats are great, owning them isn't. If I want one, I'll rent one. But I'll sure as fuck will never buy one unless I plan to live on one.
 
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C

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My uncle's sailboat had a plaque in the galley that read, "A boat is a hole in the ocean, into which you throw money."
 
Jysin

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Freshwater boats on big lakes is probably far more manageable vs boats on the ocean. Corrosive salty air trying to disintegrate your boat 24/7.
 
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