I’m jealous, 401k contributions, and therefore company match, don’t apply for my bonus
Alright, cool. I have to fight HR on benefits questions every year but they’ve always capitulated. I might have to come back to them on this one. Thanks all.
Just a wild guess but maybe HR is is equating $15K ROTH and $19.5K Pre-tax 401(k) as “equivalent take home pay”? But as others have said you can absolutely contribute $19.5K as ROTH in 2021.
1 Like
same here. frustrating.
Got some extra cash burning a hole in my pocket. Debating whether to throw $5500 in my Roth 401k or my brokerage. Normally it would be obvious, but we’re considering adoption in the next few years. I see some stories about $10s of thousands in cost for that.
i am sure it was asked before. and of course is subjective and personal. but is it safe to assume that people have a number in mind that means they can retire or do whatever they want (could include the existing regular day job, or something entirely different)? Perhaps it also has age as a variable.
It’s normal on the Financial Independence subreddit for people to have a target number. I get the idea of the simplicity. But I don’t see that idea working for me, given my retirement plans will be partially fixed income (defined benefit plan, Social Security), partially lump sum assets (401k balance), and partially illiquid (real estate).
I prefer modelling future cash flows; income vs. expenses.
2 Likes
crypto or gtfo
My mom says a nice senior home can cost upwards of 3 mil based on life expectancy. So maybe I should aim for that
Don’t know if it still exists, but there used to be a pretty significant Federal Tax kickback for international adoption. We got something like a $12k tax credit that I wasn’t expecting the year after our adoption finalized, for expenses that we had laid out over something close to 3 years. I don’t remember how much our list price was, but that credit was something like half our expenses between agency fees, vaccinations, travel costs, in-country fees, etc. Feel free to PM me if you have specific questions or want more details.
1 Like
“Why was I adopted?”
“Taxes”
2 Likes
I think this is a better method, but people like ‘a number.’ And, with some assumptions you can sort of translate… if you want a $100k income, and you have $60k in fixed income, then you need $40k income from investments, and you can back into that with the 4% rule, or 3.5%, or whatever you like. If the DB isn’t indexed to inflation, or you have multiple fixed income streams that start/stop at different times, it gets harder to model out.
People also seem to get tripped up over home ownership vs rent. At the end of the day, just figure out what you need. If you own a house then budget for repairs and taxes, if you rent then budget for rent. And that gets folded into ‘expenses,’ and then figure out the income side from there.
My plan is to pay off the house before I quit working full time. I have no fixed income except for SS, and I’m marking that zero. Not that I think it’ll be zero, but I’ll have a big gap until then so I need to plan on having perpetual income, as near enough matters. So I pretty much just have a number needed to hit the income I want to maintain my lifestyle.
The SECURE act includes a provision allowing you and your spouse to each withdraw up to $5,000 from an IRA or 401K without paying the 10% penalty following the birth or adoption of a child.
The key word there is following. So you can’t use it to defray the costs of adopting, but if you depleted your rainy day fund all the way down to $0, you could withdraw up to $10K to replenish it and buy baby stuff. Or any bills that you can pay after the adoption, such as possibly an attorney fee.
Good luck with both the decision and, if you go through with it, the actual adoption.
2 Likes
Can’t you withdraw your Roth deposits penalty free always? I thought it was only earnings that got the penalty.
Basis comes out first and tax free.
2 Likes
Yeah, I get most people prefer a raw #, but it just doesn’t work for me. I have no children to leave a house to, so I value any potential real estate as an asset to be monetized at some point (rent out or sell). Fixed income (non-inflation adjusted) certainly adds a complication.
I mean, modeling is what I do for a living, so it’s a cinch to create a spreadsheet that can model different return/inflation assumptions and different retirement dates. I’m currently eye-balling retirement at ~47 or so.
1 Like
Correct, so if you want to preserve the option to withdraw the basis later you might want to pull from a taxable account. Although obviously that does drive up your taxable income.
But you’ll get the Child Tax Credit any year you covered least 50% of the kid’s expenses, so that helps.
Like my cousin was born in December but my aunt & uncle didn’t actually get to take her home until January and the adoption wasn’t final until sometime in the spring. But they got to claim her the year she was born because, even though they literally hadn’t met her yet, they were absolutely paying >50% of her expenses.
Oh, there’s also an adoption credit (not deduction) worth up to $14,400 in 2021 and indexed to inflation. I’ve never put one on a tax return but I believe it’s a dollar-for-dollar credit for the first $14,400 of eligible adoption expenses. Doesn’t count for adopting step-children, and it phases out at incomes between $216,660 and $254,520.
You don’t have to take it all in one year, but you can. You’ve got up to 6 years to claim the whole thing. So like if you get the kid in late December and have high income that year but then take a bunch of time off the following year to bond and your income is lower, I think you can take more in the following year. Double check that though.
There are also state adoption credits out there and I know even less about them.
1 Like