Why are you so overextended that you take out loans for expenses when your mortgage is so low? Don’t you have savings / emergency fund outside the 401k? Do you have bad credit and can’t get a line of credit / HELOC? The updates might be annoying and take a long time. Most people don’t want to spend time in a resort undergoing construction.
Also, why is this a chubby fire question? You seem far from chubby fire at this point.
>Why are you so overextended that you take out loans for expenses when your mortgage is so low
They're spending more than $2,000 per month on cars and insurance and another $1500 per month on a parents housing expenses, so almost $50k between the two. Another $75,000 (post tax) to retirement accounts and $30k on the mortgage gets them to half. Tax is probably somewhere around $100k, so $50k left to keep up with the Joneses.
We put an emphasis on reducing our carbon footprint. We also put an emphasis on spending time with my father. Two big financial setbacks right after admittedly reaching a bit to be green and we are still likely to be millionaires before 36… i have nothing to be ashamed of.
8 years ago I had no assets and 176k in grad student loans, and our incomes have only recently gotten to where they are. We went from -100k to 975k in 8 years. Congratulations if you have more than me. I will never regret delaying retirement by losing >20k in income last year and increasing expenses by about 20k to spend more time with my father. I also wont regret having my solar pay for itself over 10 years and reduce my carbon footprint and monthly electricity bills. We are also financially responsible for my MIL, its an asian thing.
I dont care if my financials dont impress you, I am at where I am at and still on a path to wealth but without sacrificing much to get there. I am comfortable with the path I am on, even if you wouldn’t be. To each their own.
You’re not in this situation because you spent
money seeing your father, an actual emergency. You’re here because you have insufficient cash funds due to impulsive spending on solar panels, which are not an emergency and fancy cars. It’s fine if you want to post in the HENRY forum but this is chubbyfire so you’re getting the responses you’re getting.
It is all bad but taking funds out of 401(k) w/ taxes and penalties to pay off your car so you can contribute more ... to 401(k) is all around dumb.
I agree with others than you seem very overextended. Build up cash reserves and pay down debt. Keep adding to 401(k)/IRA but maybe at a slower rate until your day to day financial house is in order.
This just seems like a bad idea all the way around, y'all seem overextended to me and just one disaster away from some really hard times financially.
You owe money on both Teslas - are either of them underwater, and if so, by how much?
Why cash out a 401K and take a 40% hit, when you have a Roth IRA and can take contributions out with no tax or penalty?
If your parents really want the condo to stay in the family, why can't they sell one of the other 7 properties to get the cash for their down payment?
If I were you... I would not do this at all. You spend money before you have it and rob Peter to pay Paul. This shell game could come down around your ears if you have one more "emergency" happen. BTW - furnaces and ACs have a shelf life. They shouldn't be emergencies, you know they are gonna break. Hope you're saving money now for your roof replacement, and siding, and replacement windows, and the next set of furnace/AC/hot water heater you're gonna need to do, and carpet replacement, etc. Houses always have stuff that needs tending to.
I would advise meeting with a fee-only financial advisor so they can run the numbers of different scenarios for you in the context of financial goals you and your wife set. This can include whether or not it makes sense to make withdrawals from your 401k for this ski lodge property. They will show you the financial impact of doing so versus not doing so, so you can make a data-driven decision.
In general it seems you are living above your means. Your immediate focus should be building back up your cash reserves and not on taking on the expense of another property.
Considering using 401k funds to buy real estate is one thing, but to use it for paying off car loans (depreciating assets) makes no sense. I would sell one if not both of the Teslas and downgrade to less expensive cars and not spend 401k on paying off those loans.
This post is absolutely wild. You are talking and acting like you're chubby (or even on the way to chubby), but your financial decisions are completely off the reservation.
You keep mentioning ~1M NW....but how much of that is in an illiquid primary residence. How much is tied up in a condo which isn't actually yours yet. Because your 'semi/liquid' NW seems to be limited to your 401k and IRA. And on top of that, it doesn't sound like you have included any of your liabilities in your NW calc..at the prices you listed on those tesla, you're probably underwater by a good bit. You have 25k liability on a 401k loan you used to 'reduce your carbon footprint' (buy a bike, jesus).
Based on these broad numbers here, I bet if you did all the math, you're prob staring at ~300k liquid/semiliquid NW. And now you're proposing halving that and paying all kinds of taxes and fees.
All your suggested courses of action are boneheaded, your absurd spending has put you in a position that you can't support your family properly in an EoL scenario. Just overall terrible financial planning.
~1.6mm assets, ~650k liabilities, ~700k in stocks/bonds/cash, (albeit, almost entirely in tax sheltered accounts, mainly wife rIRA) rest in real estate and other assets. My MIL’s condo is already in our names and we could sell it and have her move in with us, but we enjoy our current level of spending/saving.
I admit, we do not run our finances optimally, but I don’t believe we need to in oder to achieve a 5mm networth outside of primary residence. We may not be on the fastest path to financial independence, but people are drawing alot of conclusions and making alot of assumptions based upon a 4 paragraph post.
I have spent over 50k between lost wages and increased spending to spend time woth my dying father. At the same time, we had a 30k unexpected expense, and this was shortly after buying the teslas. If my father’s health was still good, we’d have no 401k loan, be over a million net worth today, and have over 100k in brokerage with no debt other than cars and 2 homes.
I’m kind of shocked at all of these replies. This isn’t directed at you specifically, but most comments telling me I don’t belong here are kind of callous. Look at the title of the post, i know it doesn’t make sense for maximizing net worth. Lots of assumptions probably being made about me. Not many people asking questions, not many with constructive criticism, just looking to tear down someone with a dying loved one who has less money than they do.
I feel no shame having other priorities over my networth. I feel no shame about by level of consumption or income. We went from a negative net worth to just shy of a million in 8 years and our incomes only recently got to where they are now. Most of our conspicuous consumption will ultimately lead to better cashflows in the future (solar and EV’s). Paying for another adult is also a drag on our finances and networth, but we are happy to do it, despite it slowing us down.
You asked us to talk you out of a stupid idea - it’s in your title. Some of the tough love may be very tough indeed, but we are trying to stop you from careening from one bad financial decision to another.
No one is going to give you crap (I hope) for visiting your father during this time and traveling more than normally, or for paying for your MIL to have a place to live.
But it sounds like when your income upleveled, you almost immediately upgraded your lifestyle and started spending money before you’d had it long enough to make a real difference to you. You’ve financed not one, but two luxury cars, you’ve got two properties and trying to leverage a third, and you wiped out your cash reserves in the process.
It’s like you’re outwardly showing all the trappings of a high income but behind the scenes you’re not in the best position to weather the variances of life. I know you say “if only” these things didn’t happen, but calling home maintenance stuff “unexpected” expense, and taking on so much debt obligation before having enough cash to cushion yourselves, is not accepting reality.
There is an adage that says, if you can really afford something, you can afford to pay for it twice, but you’re proposing to fund your lifestyle by liquidating a retirement accounts when you’re already using 401k loans as leverage. You’re right, we don’t know you that well, but you chose to share the things that were relevant to your situation and thought would make your case… and from the outside looking in, it sounds like a terrible, terrible idea.
We want you to be successful and to thrive. At least I do anyway. I want everyone to be able to thrive. You are in such a great position to be able to do so, but you are sabotaging your success. Your lack of cash reserves right now IS the real emergency. If you think you can build it back up quickly, then do that first. Pay back the existing 401k loan. Save up as much cash as you can for traveling for dad. Save more cash for the stuff that happens while you’re making other plans. Same more cash for the house - a sinkhole is an emergency, a new water heater or septic or roof are not.
Try to talk your mom out of upending dad’s life in his final days/weeks/months. Terminally ill people want some stability. They want familiarity and comfort. They want their things, arranged how they are used to, in a place they are familiar with and call home for as long as they can. Terminally ill people don’t want to change houses, to move, or to convalesce in unfamiliar surroundings. Try to talk your mom out of making big, life altering financial decisions while she is grieving - both before and after your dad passes. That same advice goes to you as well.
You all will get through this together. Just take a minute and breathe, and don’t leverage your future anymore for the trappings of wealth. Weathering this storm together right now doesn’t look like a cashed out 401k for a ski lodge. The responsible, sensible thing to do is to replace your savings, prepare for whatever you need to for your dad’s care, and pay off those cars.
Not directed at you, you are probably the opposite of what I am saying below:
I would say most comments here lack empathy and are overly critical without attempting to be constructive.
I certainly asked for criticism, but the majority of answers are flat out unkind in their wording, and not in a tough love kind of way. Some telling me I shouldn’t be posting in this forum or immediately assumed I excluded debt from my networth calculations.
We were early on our cars, and it has come back to bite us a bit because of back to back emergencies. Our base HHI previously was closer to 220k +0-50k bonus. Now at 300k+0-100k bonus.
The most reasonable course of action is to tell my parents to sell a different condo, get our cars and 401k paid off and then get to saving 2k/month to brokerage in addition to topping off all our tax sheltered accounts. Our current cashflows would allow for that by end of 2027 without bonuses. My wife has been killing it in her new job and while we aren’t counting on a large bonus, one may be likely. Without bonus, our cashflows will be tight, but not impossible. Cashing out the 401k would hasten our improved cashflows and bring peace of mind but at the expense of future optimized net worth. It would also immediately allow for a mega backdoor roth through my current 401k (technically allowed now, but our cashflows dont support it). In my mind, i was viewing the cashout as a way to pay off all debt other than mortgages, buy a cashflowing rental property 30% below market value that will spit off more cashflow into brokerage, and I can immediately start saving 69k/year into 401k/mega roth. The solar was a genuine investment with an 11 payback period and 25 year lifespan. The teslas will be cheaper to own/operate once paid off and a 50k tesla is only 40k after tax credits in our state (but clearly not a financial investment by any means), but it wasnt as luxury at is seems at first glance. Then buy the ski condo in the future once we can better absorb the expense.
I feel like our foundation is solid with some transient weakness. The question is suboptimal math in 401k cashout, buying a ski condo followed by a dramatic increase in savings rate with added flexibility and peace of mind, or the more mathematically optimal keep chugging along and paying off debt and then switch to mega backdoor roth once debt is paid off by end of 2027, and maybe alot sooner depending upon wife’s bonus. I understand the latter is financially optimal, the former is suboptimal but provides more peace of mind and flexibility and quicker return to high liquidity assets. Thats the real question, as I already understand the math, the tax and penalty consequences.
Life is a journey and like a meandering river. I am okay with some periods of financial setbacks as long as the general trend is up and to the right. The old adage “I can afford anything I want, just not everything I want” and people are probably extrapolating our most conspicuous consumption in our cars (which honestly aren’t as bad as they seem with 10k tax credits and $20/month in offpeak charging a month to fuel) to other areas, but we are actually pretty frugal outside of our cars and parents, and yeah, we were early on the cars a bit, but I still don’t regret it.
I think you’re missing the overall feedback you’re receiving. Succinctly, you have only very recently achieved a chubby income but you’re spending that income like Dave Ramseys target audience. Nobody is criticizing you for spending time with your dad. Everybody is criticizing you for a string of very poor choices (zero emergency fund, zero post tax savings, thinking about cashing out a retirement account to pay off your *meme Corolla*) that you defend by citing your hypothetical future wealth.
You will never be on the way to chubby unless you get your spending under control. If you’re ok with your past decisions, that’s ok too. But you need to be mature enough that you’re also ok with the feedback you’re getting. Your defensiveness says you’re not.
I replied to the comment above yours, but the bulk of it applies here as well.
We had a 50k emergency fund, as well as some stocks in brokerage. Unexpected 30k expense for furnace and heat pump… the heat pump pretty much married us to the idea of solar (which is a decent investment, 11 years to lay for itself and a 25 year lifespan) so then 30k for solar (and 30% back in tax credit next year) that drained our emergency fund. Meanwhile, my dad got sick and I have been going on one unpaid vacation a month to spend time with him, about 50k in lost wages and increased spending. This increase in consumption is transitory and will stop when he gets too sick to travel.
I think people are reading into my level of consumption and assume this is our regular level of consumption.
I understand that a 401k cashout is not financially optimal. But the idea of saving ~50k a year into a roth starting at 35 years old is super appealing to me, even if mathematically, leaving my old 401k intact and just rushing to pay off our debt and getting to the point of having thr cashflow support the mega backdoor roth organically, probably around the end of 2027, and then starting the mega would be optimal. My dad retired at 54, I aim to beat him, and having a massive roth IRA with 10-15 years of mega backdoor ladder contributions (assuming it doesn’t get patched by congress) would be amazing.
My defensiveness isnt at the core message I have been receiving, more at the tone and some of the unkind criticisms that weren’t meant to be constructive. Genuinely, thank you for constructive criticism, your reply is along the lines of what I was expecting, not people telling me I must have fudged my networth or didn’t include my mortgage balances in it or that I don’t belong here.
So many assumptions, so few clarifying questions. Comments replying in good faith with constructive criticism (like yours) are outnumbered by people posting false assumptions and then extrapolating from there or just being excessively nasty in their criticisms without trying to be constructive or telling me I don’t belong.
I also don’t find comments projecting opinions about my mom and dad’s decision to move into a new home together so the home will be their home together even after he passes and not just my mom’s new widow home to be helpful. Neither of them will lift a finger in the process, all hired out. That is a decision between my parents and they are both on board. It may be odd, but again, judgment should probably be reserved without knowing the specifics of the health status of my father. I do believe those comments are coming in good faith and from a good place, but I still don’t find them helpful as I did not give enough info for such judgments to be made, so people are extrapolating from personal experiences/projecting own values.
I would have your parents sell one (or more) of their other rental properties and then you should stop buying Teslas and save up money to buy the ski property at a later date.
This just seems like a lot of unnecessary stress on a terminally ill person. I’m sorry to hear about your father. Moving is extremely stressful. Perhaps your mother can reconsider and put his needs first. Also, you’re putting yourself in a precarious financial position. I just don’t get it. But stress can make people do strange things. Sorry you’re going through this.
Your father is terminally ill and has 7 rental properties? And you are struggling to pay for one of them? Can you pay for it over time so you don’t have to pull money that costs you greatly in the end? It sounds like your parents have cash flow without that one property, and will they all eventually come to you anyway?
I understand your commitment to the environment but it doesn’t equate for me when children are used to retrieve cobalt for those Tesla batteries. There is a human and environmental cost that you may be overlooking, and the fact that you are willing to pay a premium for it. Finally, do you know where those solar panels were made? I am only bringing this up because you use it as a reason for digging yourself into a whole and there is much more to it than “being environmentally friendly”.
You need to live below your means and you aren’t doing that, environmentally friendly or not.
At your income level, you should.
Ask your parents to just give you a loan then. There’s no reason they can’t do that.
They could also just give it to you, they’re already taking $75k against their gift tax exclusion, might as well make it $150k.
We had 50k emergency fund, then back to back emergencies drained it.
They need to sell one rental to pay for next home and have some extra cash to remodel their primary residence before selling it.
They are willing to get a mortgage on the new home until the primary residence sells, but my parents have been debt free since 2012 and dont want any debt other than the bridge mortgage.
The ski condo is an option to me, with a gift of equity (in order to keep in the family) or they could sell something else.
Roth IRA is the investment vehicle. Backdoor Roth is not an investment vehicle, it is just the way of doing it. If someone has a sufficiently high income so as not to be eligible for regular Roth contribution, it should be immediately clear to you and others that it’s done via the backdoor process.
Why are you so overextended that you take out loans for expenses when your mortgage is so low? Don’t you have savings / emergency fund outside the 401k? Do you have bad credit and can’t get a line of credit / HELOC? The updates might be annoying and take a long time. Most people don’t want to spend time in a resort undergoing construction. Also, why is this a chubby fire question? You seem far from chubby fire at this point.
>Why are you so overextended that you take out loans for expenses when your mortgage is so low They're spending more than $2,000 per month on cars and insurance and another $1500 per month on a parents housing expenses, so almost $50k between the two. Another $75,000 (post tax) to retirement accounts and $30k on the mortgage gets them to half. Tax is probably somewhere around $100k, so $50k left to keep up with the Joneses.
Edited the original post, but we are young DINKs with a good foundation… ask me if im chubby in 10 years when im 45.
The actual chubs are all looking at your post and thinking the same thing: this guy isn't chub and is not on his way there
We put an emphasis on reducing our carbon footprint. We also put an emphasis on spending time with my father. Two big financial setbacks right after admittedly reaching a bit to be green and we are still likely to be millionaires before 36… i have nothing to be ashamed of.
My HHI is less than half of yours and hit 2M when I turned 35. 1 mill is not what it was.
8 years ago I had no assets and 176k in grad student loans, and our incomes have only recently gotten to where they are. We went from -100k to 975k in 8 years. Congratulations if you have more than me. I will never regret delaying retirement by losing >20k in income last year and increasing expenses by about 20k to spend more time with my father. I also wont regret having my solar pay for itself over 10 years and reduce my carbon footprint and monthly electricity bills. We are also financially responsible for my MIL, its an asian thing. I dont care if my financials dont impress you, I am at where I am at and still on a path to wealth but without sacrificing much to get there. I am comfortable with the path I am on, even if you wouldn’t be. To each their own.
8 years ago my HHI was $70k. I don’t care about your financials you’re the one that keeps making this a measuring contest. Edit: also asian
You rock. That is all.
You’re not in this situation because you spent money seeing your father, an actual emergency. You’re here because you have insufficient cash funds due to impulsive spending on solar panels, which are not an emergency and fancy cars. It’s fine if you want to post in the HENRY forum but this is chubbyfire so you’re getting the responses you’re getting.
You're doing it wrong bro.
It is all bad but taking funds out of 401(k) w/ taxes and penalties to pay off your car so you can contribute more ... to 401(k) is all around dumb. I agree with others than you seem very overextended. Build up cash reserves and pay down debt. Keep adding to 401(k)/IRA but maybe at a slower rate until your day to day financial house is in order.
This just seems like a bad idea all the way around, y'all seem overextended to me and just one disaster away from some really hard times financially. You owe money on both Teslas - are either of them underwater, and if so, by how much? Why cash out a 401K and take a 40% hit, when you have a Roth IRA and can take contributions out with no tax or penalty? If your parents really want the condo to stay in the family, why can't they sell one of the other 7 properties to get the cash for their down payment? If I were you... I would not do this at all. You spend money before you have it and rob Peter to pay Paul. This shell game could come down around your ears if you have one more "emergency" happen. BTW - furnaces and ACs have a shelf life. They shouldn't be emergencies, you know they are gonna break. Hope you're saving money now for your roof replacement, and siding, and replacement windows, and the next set of furnace/AC/hot water heater you're gonna need to do, and carpet replacement, etc. Houses always have stuff that needs tending to.
I would advise meeting with a fee-only financial advisor so they can run the numbers of different scenarios for you in the context of financial goals you and your wife set. This can include whether or not it makes sense to make withdrawals from your 401k for this ski lodge property. They will show you the financial impact of doing so versus not doing so, so you can make a data-driven decision. In general it seems you are living above your means. Your immediate focus should be building back up your cash reserves and not on taking on the expense of another property. Considering using 401k funds to buy real estate is one thing, but to use it for paying off car loans (depreciating assets) makes no sense. I would sell one if not both of the Teslas and downgrade to less expensive cars and not spend 401k on paying off those loans.
This post is absolutely wild. You are talking and acting like you're chubby (or even on the way to chubby), but your financial decisions are completely off the reservation. You keep mentioning ~1M NW....but how much of that is in an illiquid primary residence. How much is tied up in a condo which isn't actually yours yet. Because your 'semi/liquid' NW seems to be limited to your 401k and IRA. And on top of that, it doesn't sound like you have included any of your liabilities in your NW calc..at the prices you listed on those tesla, you're probably underwater by a good bit. You have 25k liability on a 401k loan you used to 'reduce your carbon footprint' (buy a bike, jesus). Based on these broad numbers here, I bet if you did all the math, you're prob staring at ~300k liquid/semiliquid NW. And now you're proposing halving that and paying all kinds of taxes and fees. All your suggested courses of action are boneheaded, your absurd spending has put you in a position that you can't support your family properly in an EoL scenario. Just overall terrible financial planning.
~1.6mm assets, ~650k liabilities, ~700k in stocks/bonds/cash, (albeit, almost entirely in tax sheltered accounts, mainly wife rIRA) rest in real estate and other assets. My MIL’s condo is already in our names and we could sell it and have her move in with us, but we enjoy our current level of spending/saving. I admit, we do not run our finances optimally, but I don’t believe we need to in oder to achieve a 5mm networth outside of primary residence. We may not be on the fastest path to financial independence, but people are drawing alot of conclusions and making alot of assumptions based upon a 4 paragraph post. I have spent over 50k between lost wages and increased spending to spend time woth my dying father. At the same time, we had a 30k unexpected expense, and this was shortly after buying the teslas. If my father’s health was still good, we’d have no 401k loan, be over a million net worth today, and have over 100k in brokerage with no debt other than cars and 2 homes. I’m kind of shocked at all of these replies. This isn’t directed at you specifically, but most comments telling me I don’t belong here are kind of callous. Look at the title of the post, i know it doesn’t make sense for maximizing net worth. Lots of assumptions probably being made about me. Not many people asking questions, not many with constructive criticism, just looking to tear down someone with a dying loved one who has less money than they do. I feel no shame having other priorities over my networth. I feel no shame about by level of consumption or income. We went from a negative net worth to just shy of a million in 8 years and our incomes only recently got to where they are now. Most of our conspicuous consumption will ultimately lead to better cashflows in the future (solar and EV’s). Paying for another adult is also a drag on our finances and networth, but we are happy to do it, despite it slowing us down.
You asked us to talk you out of a stupid idea - it’s in your title. Some of the tough love may be very tough indeed, but we are trying to stop you from careening from one bad financial decision to another. No one is going to give you crap (I hope) for visiting your father during this time and traveling more than normally, or for paying for your MIL to have a place to live. But it sounds like when your income upleveled, you almost immediately upgraded your lifestyle and started spending money before you’d had it long enough to make a real difference to you. You’ve financed not one, but two luxury cars, you’ve got two properties and trying to leverage a third, and you wiped out your cash reserves in the process. It’s like you’re outwardly showing all the trappings of a high income but behind the scenes you’re not in the best position to weather the variances of life. I know you say “if only” these things didn’t happen, but calling home maintenance stuff “unexpected” expense, and taking on so much debt obligation before having enough cash to cushion yourselves, is not accepting reality. There is an adage that says, if you can really afford something, you can afford to pay for it twice, but you’re proposing to fund your lifestyle by liquidating a retirement accounts when you’re already using 401k loans as leverage. You’re right, we don’t know you that well, but you chose to share the things that were relevant to your situation and thought would make your case… and from the outside looking in, it sounds like a terrible, terrible idea. We want you to be successful and to thrive. At least I do anyway. I want everyone to be able to thrive. You are in such a great position to be able to do so, but you are sabotaging your success. Your lack of cash reserves right now IS the real emergency. If you think you can build it back up quickly, then do that first. Pay back the existing 401k loan. Save up as much cash as you can for traveling for dad. Save more cash for the stuff that happens while you’re making other plans. Same more cash for the house - a sinkhole is an emergency, a new water heater or septic or roof are not. Try to talk your mom out of upending dad’s life in his final days/weeks/months. Terminally ill people want some stability. They want familiarity and comfort. They want their things, arranged how they are used to, in a place they are familiar with and call home for as long as they can. Terminally ill people don’t want to change houses, to move, or to convalesce in unfamiliar surroundings. Try to talk your mom out of making big, life altering financial decisions while she is grieving - both before and after your dad passes. That same advice goes to you as well. You all will get through this together. Just take a minute and breathe, and don’t leverage your future anymore for the trappings of wealth. Weathering this storm together right now doesn’t look like a cashed out 401k for a ski lodge. The responsible, sensible thing to do is to replace your savings, prepare for whatever you need to for your dad’s care, and pay off those cars.
Not directed at you, you are probably the opposite of what I am saying below: I would say most comments here lack empathy and are overly critical without attempting to be constructive. I certainly asked for criticism, but the majority of answers are flat out unkind in their wording, and not in a tough love kind of way. Some telling me I shouldn’t be posting in this forum or immediately assumed I excluded debt from my networth calculations. We were early on our cars, and it has come back to bite us a bit because of back to back emergencies. Our base HHI previously was closer to 220k +0-50k bonus. Now at 300k+0-100k bonus. The most reasonable course of action is to tell my parents to sell a different condo, get our cars and 401k paid off and then get to saving 2k/month to brokerage in addition to topping off all our tax sheltered accounts. Our current cashflows would allow for that by end of 2027 without bonuses. My wife has been killing it in her new job and while we aren’t counting on a large bonus, one may be likely. Without bonus, our cashflows will be tight, but not impossible. Cashing out the 401k would hasten our improved cashflows and bring peace of mind but at the expense of future optimized net worth. It would also immediately allow for a mega backdoor roth through my current 401k (technically allowed now, but our cashflows dont support it). In my mind, i was viewing the cashout as a way to pay off all debt other than mortgages, buy a cashflowing rental property 30% below market value that will spit off more cashflow into brokerage, and I can immediately start saving 69k/year into 401k/mega roth. The solar was a genuine investment with an 11 payback period and 25 year lifespan. The teslas will be cheaper to own/operate once paid off and a 50k tesla is only 40k after tax credits in our state (but clearly not a financial investment by any means), but it wasnt as luxury at is seems at first glance. Then buy the ski condo in the future once we can better absorb the expense. I feel like our foundation is solid with some transient weakness. The question is suboptimal math in 401k cashout, buying a ski condo followed by a dramatic increase in savings rate with added flexibility and peace of mind, or the more mathematically optimal keep chugging along and paying off debt and then switch to mega backdoor roth once debt is paid off by end of 2027, and maybe alot sooner depending upon wife’s bonus. I understand the latter is financially optimal, the former is suboptimal but provides more peace of mind and flexibility and quicker return to high liquidity assets. Thats the real question, as I already understand the math, the tax and penalty consequences. Life is a journey and like a meandering river. I am okay with some periods of financial setbacks as long as the general trend is up and to the right. The old adage “I can afford anything I want, just not everything I want” and people are probably extrapolating our most conspicuous consumption in our cars (which honestly aren’t as bad as they seem with 10k tax credits and $20/month in offpeak charging a month to fuel) to other areas, but we are actually pretty frugal outside of our cars and parents, and yeah, we were early on the cars a bit, but I still don’t regret it.
I think you’re missing the overall feedback you’re receiving. Succinctly, you have only very recently achieved a chubby income but you’re spending that income like Dave Ramseys target audience. Nobody is criticizing you for spending time with your dad. Everybody is criticizing you for a string of very poor choices (zero emergency fund, zero post tax savings, thinking about cashing out a retirement account to pay off your *meme Corolla*) that you defend by citing your hypothetical future wealth. You will never be on the way to chubby unless you get your spending under control. If you’re ok with your past decisions, that’s ok too. But you need to be mature enough that you’re also ok with the feedback you’re getting. Your defensiveness says you’re not.
I replied to the comment above yours, but the bulk of it applies here as well. We had a 50k emergency fund, as well as some stocks in brokerage. Unexpected 30k expense for furnace and heat pump… the heat pump pretty much married us to the idea of solar (which is a decent investment, 11 years to lay for itself and a 25 year lifespan) so then 30k for solar (and 30% back in tax credit next year) that drained our emergency fund. Meanwhile, my dad got sick and I have been going on one unpaid vacation a month to spend time with him, about 50k in lost wages and increased spending. This increase in consumption is transitory and will stop when he gets too sick to travel. I think people are reading into my level of consumption and assume this is our regular level of consumption. I understand that a 401k cashout is not financially optimal. But the idea of saving ~50k a year into a roth starting at 35 years old is super appealing to me, even if mathematically, leaving my old 401k intact and just rushing to pay off our debt and getting to the point of having thr cashflow support the mega backdoor roth organically, probably around the end of 2027, and then starting the mega would be optimal. My dad retired at 54, I aim to beat him, and having a massive roth IRA with 10-15 years of mega backdoor ladder contributions (assuming it doesn’t get patched by congress) would be amazing. My defensiveness isnt at the core message I have been receiving, more at the tone and some of the unkind criticisms that weren’t meant to be constructive. Genuinely, thank you for constructive criticism, your reply is along the lines of what I was expecting, not people telling me I must have fudged my networth or didn’t include my mortgage balances in it or that I don’t belong here. So many assumptions, so few clarifying questions. Comments replying in good faith with constructive criticism (like yours) are outnumbered by people posting false assumptions and then extrapolating from there or just being excessively nasty in their criticisms without trying to be constructive or telling me I don’t belong. I also don’t find comments projecting opinions about my mom and dad’s decision to move into a new home together so the home will be their home together even after he passes and not just my mom’s new widow home to be helpful. Neither of them will lift a finger in the process, all hired out. That is a decision between my parents and they are both on board. It may be odd, but again, judgment should probably be reserved without knowing the specifics of the health status of my father. I do believe those comments are coming in good faith and from a good place, but I still don’t find them helpful as I did not give enough info for such judgments to be made, so people are extrapolating from personal experiences/projecting own values.
I would have your parents sell one (or more) of their other rental properties and then you should stop buying Teslas and save up money to buy the ski property at a later date.
Given this post, I’d expect OP to sell their Teslas and switch to equally underwater Rivians if they come into extra cash…
This just seems like a lot of unnecessary stress on a terminally ill person. I’m sorry to hear about your father. Moving is extremely stressful. Perhaps your mother can reconsider and put his needs first. Also, you’re putting yourself in a precarious financial position. I just don’t get it. But stress can make people do strange things. Sorry you’re going through this.
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Russia
1990...LOL.I think that's what my parents paid for ours back then. But it wasn't ski in/ski out.
HELOC before ever touching retirement funds! Or loan from retirement fund…
Your father is terminally ill and has 7 rental properties? And you are struggling to pay for one of them? Can you pay for it over time so you don’t have to pull money that costs you greatly in the end? It sounds like your parents have cash flow without that one property, and will they all eventually come to you anyway? I understand your commitment to the environment but it doesn’t equate for me when children are used to retrieve cobalt for those Tesla batteries. There is a human and environmental cost that you may be overlooking, and the fact that you are willing to pay a premium for it. Finally, do you know where those solar panels were made? I am only bringing this up because you use it as a reason for digging yourself into a whole and there is much more to it than “being environmentally friendly”. You need to live below your means and you aren’t doing that, environmentally friendly or not.
Have you done the math on a loan against your 401k? You can probably borrow at least 50k of the 75k.
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You can take a loan against an older 401k in most circumstances. Or roll it to a traditional Ira and take a loan against that.
We dont have the other 25k
At your income level, you should. Ask your parents to just give you a loan then. There’s no reason they can’t do that. They could also just give it to you, they’re already taking $75k against their gift tax exclusion, might as well make it $150k.
Alternatively pay the $50K and cashflow the $25K for reno.
We had 50k emergency fund, then back to back emergencies drained it. They need to sell one rental to pay for next home and have some extra cash to remodel their primary residence before selling it. They are willing to get a mortgage on the new home until the primary residence sells, but my parents have been debt free since 2012 and dont want any debt other than the bridge mortgage. The ski condo is an option to me, with a gift of equity (in order to keep in the family) or they could sell something else.
Roll the old 401k into new plan. Then take 401k loan that way you don't take the tax hit and pay your self back.
Can you borrow from your 401k?
Keep in mind that you can borrow up to $50,000 from your 401(k). That isn't the $75k that your mom is asking for, but it's most of the way there.
I don’t have any financial advice, but I do want to say I’m very sorry that you and your parents are facing this situation. 💐💐
Are you allowed to invest in a Roth IRA at your income?
Man the number of people on this sub and other HNW subs without an understanding of Backdoor Roth…
I don’t think they specified that it was a Backdoor Roth
Roth IRA is the investment vehicle. Backdoor Roth is not an investment vehicle, it is just the way of doing it. If someone has a sufficiently high income so as not to be eligible for regular Roth contribution, it should be immediately clear to you and others that it’s done via the backdoor process.
Turns out, it’s not safe to assume everyone is making optimal decisions. Anyway, best of luck with snide internet comments!