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Financial Freedom, Financial Journey, Financial Planning, Lifestyle, Retirement Planning

May 2017 Non-W2 Incomes Report

Hello readers. Even though it’s not officially summer, it seems like that’s what’s been on everyone’s mind around here. Pool and BBQ parties are in full swing. I briefly looked at upcoming free family events in the city and there are some great ones I plan taking my daughter to this month.

My family and I recently came back from a week-long vacation by the Gulf of Mexico. We spent half of our time in Port Aransas (Mustang Island and North Padre Island) and the other half in South Padre Island (including Port Isabel).

What’s my impression of the Texas coast (several years ago, I also visited Galveston and Rockport)? My view is pretty biased considering that I’ve lived in the California coast for over a decade and have visited some amazing beaches and seen beautiful water in other parts of the world. There’s not much to say about the Texas coast other than it is a good place that tides me over (my craving for beach and sun) until our next vacation to the French Riviera (or other parts of the Mediterranean) or Hawaii.

With that said, I did enjoy my time there. We visited a different beach every day, playing in the sand and putting our feet in the warm gulf water (a very good surprise!). It was a very slow-paced vacation, which was very different than most of the other vacations we’ve had. There wasn’t much else to do other than heading to the beach which was precisely the part that made this vacation very relaxing. We took our time enjoying hour-long breakfasts, meandering along the beach, soaking in the sun and building sandcastles. We also took the time to watch the sunset and go on short cruises.

Of the 8 years that my husband and I have been together, we’ve probably traveled 20 times together. And this most recent trip was the easiest and most relaxing…relaxing in the sense that time didn’t matter as there was no set itinerary.

When we arrived home the following day, we reviewed our finances. And below is a summary of our May 2017 Non-W2 incomes report. The total amount is very similar to that of April 2017. Neither my husband nor I received any dividend/interest payments in our Roths. You’ll also notice that I took out the row tracking “Her 401(k)” and added in a new row now tracking “Her IRA”.

may income report

We started tracking these numbers back in December 2016. You can view our past reports and why we’re doing this here. We use Personal Capital, a free financial tool, to track our net worth, view our investment performance, analyze our asset allocations and project our retirement goals. I wrote a comprehensive review of Personal Capital on another post. I encourage you to check it out.

This is it for now. Thank you for stopping by. I’m looking forward to our June numbers. According to my husband, June should be a great month for us. We’ll see. As stated before, this is the first time we’re tracking our non-w2 incomes systematically over a period of time. 

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Financial Empowerment, Financial Freedom, Financial Independence, Financial Journey, Financial Planning, Lifestyle, Marriage and Money, Money Habits, Purchase Decisions

My Husband and I Created a Fun Fund!

Our “Fun Fund”

My husband and I recently created a “Fun Fund”. And the size of this fund is about 39.6% of our current projected/planned annual expenses. This Fun Fund includes the following categories: travel (we’d like to do two international trips and two U.S. trips per year as a family), gifts, charity, wardrobe items, entertainment and dining (e.g., treating others to meals; we’re already allocating $1,000 outside of the Fun Fun each month to spend on groceries and family dining).

fun fund

In a previous article, I mentioned that our projected annual expenses for year 2017 (and possibly the near future years, too, at the time of writing) was $50,000. Then, early this month, we’ve decided to move that number back up to $60,000 (our annual expenses in year 2015 and 2016 was $60,000), even though we currently don’t have child care expenses.

With a budget of $50,000, we were allocating about $13,700 toward the categories aforementioned. We’ve (most, I) came to realize such a number was a little over-stretched and won’t bring me much happiness. So, my husband and I looked at our financial numbers again, and we’ve decided that we can spend up to $60,000 a year and still be able to save a lot.

In my husband’s own words: “I feel I’ve lived my 60s while in my 20s, and now I’m living my 30s in my 30s. Maybe I’ll live my 20s while in my 40s!”

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Financial Freedom, Financial Journey, Financial Planning, Retirement Planning

April 2017 Non-W2 Incomes Report

This post brings you another snapshot of our non-W2 incomes reports. We started tracking these numbers back in December 2016. You can view our past reports and why we’re doing this by clicking here.

If you’ve been reading our incomes reports, you might’ve noticed some patterns: the total amount vary from month to month and that some accounts do better in certain months than others. As such, it would be very difficult to structure our financial life around these numbers on a month-to-month basis. Once we have a full year of tracking, then we’d have a better idea.

April 2017 non-w2 incomes report

The total amount in April 2017 was $2,098.83. This number is a little misleading. I did a 401(k) rollover in mid April (you can read about my experience here) and decided not to track the dividends/interest payments until May.

My Roth account didn’t receive any payments. I only have a few stock tickers in this account. On the other hand, the financial coaching income resumed. My husband recently started working with a new client. He’s currently accepting new clients. Let’s connect if you’re interested in the financial coaching he provides.

This is it for now. Our goal is to get these reports out during the first week of each month. Now that we’re mostly settled into our new life routines, we’re making this a goal once again!

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Financial Journey, Financial Planning, On Investing, Retirement Planning, Work and Career

After-Tax 401(k) Contributions (aka Mega Backdoor Roth)

If you live in the U.S. and work for a decent size employer, you’ve probably heard of a pretax 401(k) profit-sharing plan. You can read my previous articles on 401(k) by following this link here. In this article, I walk you through what are after-tax 401(k) contributions and how this is different from a traditional (pre-tax) 401(k) plan or Roth 401(k). I cover how this plan works and why might you want to make after-tax contributions to a 401(k), provided it’s available to you through your employer. I also share the insights my husband and I have learned regarding after-tax contributions, such as rollover options.

after tax 401 contributions mega backdoor Roth

I first read about after-tax contributions just about a year ago. I recall sharing that information with my husband afterward and we wished such an option was available to either one or both of us through our employers. To our surprise, our wish came true a few months later. My husband’s employer made the after-tax 401(k) contribution option available. Since then, both of us have learned a lot more about the rules that govern the after-tax 401(k).

What is an After-Tax 401(k) Contribution?

Sometimes, the after-tax 401(k) is also referred to as the mega backdoor Roth. This plan allows qualifying participants to set aside more money toward their retirement accounts, using after-tax money (that is, money they get paid that they’ve already paid tax on).

Currently, the maximum amount plan participants are allowed to contribute to a pre-tax 401(k) is $18,000. Just like like a traditional (pre-tax) 401(k), there are no income limits/restrictions. If your employer allows after-tax contributions to your 401(k), you may be allowed to save up to the $54,000 IRS limit for 2017. This amount is an overall cap, which includes your $18,000 pre-tax contributions plus any employer contributions.

Let’s say for year 2017, you plan to max your pre-tax 401(k) contribution plus 3% match on $100,000 salary. This combined number equals to $21,000. Subtracting this amount from $54,000 gives you $33,000 max to put toward your after-tax 401(k).

However, keep in mind that some employers who offer the after-tax contributions might not allow their employees to contribute up to the IRS limit for the year. For instance, your employer might set such a rule that you’re only allowed to contribute 10% of your income per pay period toward your after-tax contribution plan. Check with your HR and plan administer to learn what’s available to you.

After-Tax 401(k) Plan is Not the Same as a Roth 401(k)

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Financial Journey, Financial Planning, Retirement Planning, Work and Career

401(k) Direct Rollover

When I left my previous employment in early March 2017, I was eager to do a 401(k) direct rollover as soon as possible. In an earlier article, I shared that my 401(k) plan charged relatively high fees. I was also excited to have more control over my investment options. In this article, I’m sharing my experiences doing a 401(k) direct rollover to a traditional IRA. I hope you’ll find this article useful as you go on to learn what’s financially possible for you. I also wrote two comprehensive articles on 401(k) here and here if you’re interested in reading additional materials. 

401k direct rollover

With a direct rollover, the funds are transferred directly from your 401(k) plan to your IRA custodian (or brokerage) and you will not pay an early withdrawal penalty or taxes. The check for the funds is made out to your IRA custodian, not you. For this reason, when you’re ready to do a 401(k) rollover, be sure you’ve already set up a traditional IRA account with the custodian of your choice. Then, when you speak with your previous employer and/or 401(k) plan administrator, be sure to let them know you’re doing a direct rollover and that the check won’t be made out to your name. If the check does get made out to your name, you might have to face taxes consequences immediately. Although you’ll be getting that money back after you filed your tax return (provided you’ve done the rollover correctly and remember to do your tax return correctly), the extra paperwork and hassle are unnecessary. Avoid this while you can. In my case, the check was made “payable to (my brokerage), For the Benefit Of (FBO) of Nina”.

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