Post: #1

I'm going to be starting a new job this summer. It's a year round position, and it will be my first ever 6-figure job. It will be in a remote and isolated area, but I've been working that the last few years so I'm used to it (that's the major downside). I own very few things- cold winter gear, coats, hats, gloves, boots, hunting gear, few hunting rifles. That's it. I have nothing else. When I move I pack everything into totes and mail it to the next place.

With the new job I'll have the ability to put away roughly $50K in the various tax sheltered accounts available under the Internal Revenue Code. I have no bills outside of normal expenses (food, utilities, rent) and have a large, liquid cash balance saved up for emergencies.

I'm trying to figure out what I should do with my excess cash flow. I've considered taking advantage of 100% of the tax sheltered space available to me. This would cut down on my tax bill now, take advantage of tax deferred compounding, and have an extra layer of asset protection vs a regular account or cash on hand.

Do you think it is a good idea to maximize the tax advantaged space? Have any of you ever gotten to a point and realized you had too much inside these accounts (for example, you want to pull money out before 59.5) and wished you had not done it?

Post: #2

If you have no debt and no short term plans to use this money to buy property or invest in business, put as much as possible in tax advantaged accounts.

I would recommend the bogleheads and mr money mustache forums. Bogleheads is probably better for investment advice. Register there and ask the same questions, including asset allocation and specific funds.

There are ways to pull money from tax advantaged accounts and not pay tax or penalty if you retire early. Many financial independence / early retirement bloggers wrote about this, including Mr Money Mustache and Go Curry Cracker.

Pay attention to management fees, because this is where you can get screwed if your choices are limited. As a general rule, anything more than 50 basis points (0.5%) per year is shit. 5 basis points is very good (for example, S&P500 funds by Vanguard).

How can you invest 50K per year in tax advantaged accounts, though? For a single person, it's normally 18K in 401K, 5K in Roth IRA (unless the income is too high) and something like 3500 in HSA if you have a high deductible health insurance plan. Plus whatever the employer drops in the 401K. It's still less than 50K in total for most people.

Post: #3

^^ Could be a double dip 457b & 401k situation which doubles up the 18k to 36k... plus 5500 for IRA, and $3350 for HSA gets you close to $50k. Or a SEP IRA and/or Individual business 401k would definitely get you close/past that mark.

Post: #4

Yes, no debt and no plans for business or property at the moment. I'll check out those forums you suggested, thanks for the heads up.

The total space was just kind of an estimate. I was counting $5k Roth, $18k 403(b), $18k 457(b), and somewhere around $10k - $20k in a mandatory 401(a) plan. I haven't seen the actual fund lineups and hopefully there are reasonable choices.

Would you still do it if the fund choices did not offer something with a reasonable management fee?

Post: #5

(04-05-2016 12:51 AM)frozen-ace Wrote:  Yes, no debt and no plans for business or property at the moment. I'll check out those forums you suggested, thanks for the heads up.

The total space was just kind of an estimate. I was counting $5k Roth, $18k 403(b), $18k 457(b), and somewhere around $10k - $20k in a mandatory 401(a) plan. I haven't seen the actual fund lineups and hopefully there are reasonable choices.

Would you still do it if the fund choices did not offer something with a reasonable management fee?

I would still consider investing in tax advantaged accounts even with high management fee if there is a company match (free money) and other incentives. Even without company match, I would still consider it and try to select funds with the lowest fees (for example, index funds, such as S&P500 funds, generally come with lower fees than managed/target date retirement funds).