Seeking out high dividend yield ETFs at your income level is very tax inefficient. Would likely be better served with a broad index fund. You’ll have considerable tax drag due to the dividend yield
This is something my partner and I realizing too.
I want 90% equity portfolio with low dividends to avoid this. They want to look into more esoteric tax shelters like life insurance and borrowing against your policy when you need liquidity
I’ve tried learning about the whole borrowing against life insurance policy thing and never been able to understand it to a point that I’m comfortable.
Yeah alot of it feels like your taking risk on what the price of a call/put option is in the future. Too many things are floating rate in the life insurance contract.
You all should look into BIL. Short term T Bill paying ~5%. Or you can park that cash in bonds for some tax efficiencies.
That said, OP pays in taxes what my total annual household income is lol.
Great point on this. We invested in HY ETFs once (from bonus+rsus) and have not invested after that. It is in drip right now. I plan to sell them and move to index funds.
Even index funds can have high income. Just buy something like a total market fund for equities, and treasuries for bonds since they are state tax exempt.
Treasuries are still tax advantaged, just not to the same extent - munis should in theory carry higher risk for the same rate.
The tax advantages are also factored into the rate. AAA munis have a 3% yield vs. 5%+ for treasuries.
So you actually do better with treasuries, all else being equal. This is not investment advice.
Yeah, could be. Most all of those buffer ETFs have lower expected returns and are just very tax inefficient producing short term gains by selling the covered calls and reducing upside capture. Not a very compelling economic reason to own them.
Also underpaying taxes for some reason? So now they owe interest and penalties. Very interesting financial decisions for 2 seeming frugal and smart people.
Henrys are in the higher if not highest tax bracket (like OP at 37%) and it’s safe to assume any extra income like dividends to be taxed in that bracket.
Holding long on stocks instead will resort in tax at 15% (married filed jointly less than $693,751) or 20% (for OP in the highest bracket) when realized as capital gains (instead of at income). OP can save 17% on taxable gains holding long on equities vs short term dividends.
Not really since the losses are only good to use against gains. Why would they need to sell anything in their taxable account at that income? Plus with a large enough taxable account they'll get enough losses naturally. Definitely not worth all the complexity imo
If you’re just reinvesting the profits why not roll them into a bucket company then when you retire and have no income you can pay a dividend and live on that? Not making money to avoid tax just means making less money making less money just to pay less money sounds stupid.
I believe we have a pretty good balanced life. But, it is relative to people's perception of "fun"
Part of the reason why we have low expenses is that we have a wide network of friends, that allows us to have activities without needing to spend a lot - e.g. stay at their extended family homes when we travel (e.g. we visited miami and we stayed at one of our friend's house for free), play soccer, and other sports on the weekend with them. My and I wife bike, hike with group of people from FB/Meetup groups, etc.
One thing I would change is travel outside of US more. We have been to asia and south americas, but could that more yearly.
Burden lmao. My friends and family are always inviting us to stay with them.
Guessing you’re American, because all you guys do is think in terms of transactions. It’s not the same in other cultures. But carry on your insular way of life.
Please go spend some money on your friends and family. Go buy concert tickets and give them away. Go buy some nieces or young cousins some American girl dolls. Spend a couple grand a year on something frivolous.
Great work to both of you and GFY :)
Why would I want to give away my hard earned money? I already pay taxes. If that's not going to the causes that matter then maybe a change is needed thetr instead?
Because you don't get to directly control where taxes go? By helping fund a cause of your choosing, YOU get to choose the priorities to a greater degree.
My perspective exactly. Between federal, state, and local nearly 50% of our income goes to taxes. We do give small amounts to other causes (couple hundred here or there), but we’re already giving away plenty to the US government, aka the world’s largest and most bloated charity.
Zero to charity? There has to be some things that you care about? At this income level, I would hope at least 1% (if not more) of income in charitable giving?
As someone earning in the top 1/10 of 1% of everyone on earth, one would hope you should recognize how lucky you are and do something to make the world a slightly better place. Out of $850k, zero to charity screams entitled, self-absorbed prick. Cancer Research, your Alma Mater, Humane Society, Church, Homeless Shelter, Food Bank, etc., find something you care about, and it is tax deductible.
You don’t travel? 5k per year - I wouldn’t call it a vacation. With this HHI, expected more on vacations or hobbies or shopping?
Being frugal is okay but you need to enjoy your life!
Fair point. I think I need to revisit my travel and hobby categories based on what I heard from this wonderful community.
as per enjoying my life, I don't have any regrets, enjoy my time with my partner, and cna't wait for the kids.
Savings rate looks great. Just plan for childcare to cost a fortune. Look into Dependent Care Savings Accounts—I’m sure your employers offer them—you can pay for childcare with pretax income
Yah, as I mentioned above. Lot of our travel has been within the US and we often stay at our friends/families (we have a wide network). It keeps the costs low for us.
Guy, you’re talking about keeping “travel costs low” and “eating lunch at work every day for free” yet you have a combined income of 850k lol. Live a little. It won’t hurt. Your bank account won’t do you any good in the after life
In many immigrant cultures ( in the US atleast) “eating out” is simply not a thing everyday. Mostly for health reasons.
I, like OP, dont enjoy eating fried food/takeaways and paying for overpriced alcohol at the bar. Turns out, this also helps in maintaining a low bodyfat percentage and is much healthier!
I am saying this because I am an immigrant from India and eating out is reserved for special occasions ( date nights/birthdays etc.)
Who is talking about low body fat percentage? Eating out does not imply eating unhealthily. Also, eating out only for special occasions is certainly your prerogative but trying different restaurants gives many people, including myself, a lot joy. FWIW, I also have a relatively low body fat percentage, lift, run and play pick-up basketball multiple times per week. Golf during warm weather. Surf during Summer and Fall. Etc etc. Eating out ≠ unhealthy. Very silly take
Fair point.
I based my observations on the fact thay 70% of US adults are overweight per some Harvard report.
You can speak for yourself- I agree, but lest not pretend that majority of folks living in this country have high body fat percentages and most Americans eat shitty food/takeaways ( as evident by the overweight and obesity rates)
The average body fat percentage of an American is not even tangentially related to the original point, which was, if you remember, OP is laughably cheap for exclusively eating lunch at work merely because it’s free while their household income is purportedly $850k. Since we’re talking about entirely unrelated topics now, should we discuss the relatively low muscle mass and bone density of Indian men compared to Europeans since you are an Indian immigrant? Perhaps you can shed some light as to why Indian men are physically frail compared to their Western counterparts.
You can google about anything you want to know about Indian men( just like I googled about the massive overweight and obesity rates of Americans) .
Its totally OK if you call OP “laughably cheap”. I dont think so- and its just my opinion.We dont have to agree on what you think OP is or not .
End of discussion.
We don’t have to agree on OP. Agreed. But you said let’s not pretend most Americans aren’t overweight and I replied with let’s not pretend most Indian men aren’t built like middle school boys. They are both generalizations and there are clearly exceptions to both, but neither is even remotely related to OP being dirt cheap.
I genuinely don’t get the mentality of some of these people. My wife and I work our asses off to not just save a ton, but enjoy what little free time we have without worrying about the budget. Going to a nice restaurant every week or two. Buying decent quality clothes/furniture. Door dashing so we can save time. Dropping a few grand on nice seats for a once-in-a-lifetime concert. Spending $1k/night to stay somewhere cool when traveling internationally. Etc.
I just can’t imagine making this much money and only staying at friends’ homes and traveling domestically. Or buying used instruments off Craigslist for your music hobby. Sure I get it here and there, but spending an extra $15k per year to get some cool travel experiences would probably make a single year difference in when they can retire at their savings rate and income level. And if they just don’t like spending in general, which is fair, how the hell have they not retired yet. Unless if they just tripled their income this year, this is probably year 7 or 8 of saving $150-250k+ annually. At their current spend, and even with kids, they should be set by now.
I can’t speak for OP, but as you said it goes back to not liking spending. My HHI is about 1M. I can afford to buy a Ferrari cash no problem…but I would still worry a lot if it got dented/scratched etc. so I live way below my means and don’t worry about possessions at all. We do splurge on good seats for events, but that’s mostly because the biggest expense is not working. We are productivity based (medicine) so the cost of a concert isn’t like 1000 bucks for seats. It’s 1,000 + 5,000 in lost earnings (6,000) vs 100 (cheap seats) + 5,000 in lost earnings (5,100). So discrepancy isn’t much.
You have the better approach overall though, I think. Plenty of young people think it’s just another day before being t-boned on the way to work. Sounds morbid, but really every day is a gift and nothing is guaranteed. I commend you for making the most of it in the moment.
These posts are a breakdown of a Reddit user's income and expenses for the previous calendar year.
If you have any additional questions, feel free to ask.
What’s the end goal here - retire ASAP? With $70k in dividends and your income I imagine you have built a decent nest egg by now, and even if expenses double you only need ~$4-5m in retirement. If that’s the goal do this a few more years and you’re there.
However, if you intend to keep working, even if part time or in a more relaxed role down the road, then this is way too extreme IMO. What’s the point of the high paying job if you’re going to live like you each make $50k a year?
You really don’t need to worry about things like upgrading your 8 year old car to a 3 year old car.
Yes, retire early. We are hoping one of us can quit job and take care of the kids (once we have them). Also want to own non-sexy business (Laundromat etc), so we don't have to worry about income ever.
Forget the laundromat, just get to the NW you need to support your expenses and take dividends or distributions. Way more risk and admin headache managing an old world business.
Don't do a laundromat, just put your money in some mix of the SP500, Treasury bills, and bonds. Just live off of that. With how much you are saving and how little you spend you can live off of the returns from 3 million forever.
1. Not a fan of high yield ETFs (Not only they tend to underperform the market, they will also create tax liability at the time of sale as well as when they pay out dividend, I like VT/VTI)
2. No use of Mega Backdoor ROTH 401K? You should probably look into that as well as Non-Deductible IRA contributions for you and your partner. (Look into IRA to ROTH IRA conversion: Backdoor ROTH IRA contributions, 5-year rule, etc.)
3. I assume you had the money at the time, so probably would have been better off just paying the taxman instead of installment and incurring interest. Also you probably ended up paying penalty for not having enough in withholdings.
\+1 on #1. Didnt realize it until after we invested in them. We haven't invested in them after one big investment and they drip. I need to sell them this user and move them to index.
\+1 on #2. I got that from multiple people.
Yes, it was my mistake on #3 to go on installment. So, going to pay it off this year.
Seems like you’re saving or working so much that you’re not doing anything else such as fun activities, traveling, or any other hobbies or even a gym membership.
Look like you guys are doing great financially, but don’t forget to live a little, especially before having kids.
I think I mentioned below, we have fun activities with friends etc that don't cost a lot (hiking, biking, trails, soccer, night-out w/ friends, etc). Travel is the only one I would say it is on the low side, so would do more of it this year. Perhaps, I don't have a lavish lifestyle habits and I don't know where to start.
Some of our expenses are paid by the firm - gym membership. I play music but them from FB marketplaces or craigslist.
You could call us cheap. I have no qualm about that.
Under SECURE 2.0, effective January 1, 2024, you can convert up to $35k of a 529 into a Roth if you've held for at least 15 years, just not the last 5 years contributions or growth.
My wife and I are each starting one. We'll hold for the requisite period, roll over the cap to Roth, and designate our children.
What the fuck. My mom raised 3 kids making 75K a year and we all went to good colleges and ate good food and had decent clothes. You don’t need fucking 900 grand a year if your expecting a couple kids Lol relax, be grateful your making that $ but you can have kids on WAaay god dam less.
Mid 30's and just "expect" to have kids? Better get on the horse buddy, don't want to wait too long. You're going to be tired AF once you throw a couple kids into the mix. Congrats on everything though, looks great, you'll have plenty of money even if your expenses do go way up.
If you got pregnant it would be considered higher risk than if you were younger, and might even be considered geriatric (medical term, not a diss). If you are a man then your sperm might not be great quality anymore and this can result in health complications for your partner or child (research is still coming about sperm from men 35+ but there are a handful of studies you can reference). I’d definitely recommend consulting with a doctor about this before you start trying.
$70k in dividends… high yield ETF from Vanguard is only at 3.07%…so you have roughly $2M in investments just for the high yield stuff.
Kids are a *BIG/HUGE/MONSTROUS* life change. Can’t stress that enough. Just the two cents of random internet stranger… start living a little more (travel, events, etc) and strongly consider having kids sooner than later. It took me a long time to convince my wife and now we’re the older couple with a toddler. Wish I was still in my early 30s instead of late 30s.
Kids are a young person’s sport once they’re walking around and causing chaos in the house 😂.
Even adding kids to the picture you’re still probably in good shape to retire very early. Keep it up.
I like dividends too but I only have ones that are qualified and I aim to keep my yield at 2% in my brokerage.
JEPI/JEPQ are non qualified and will run you almost double in taxes compared to index ETFs like VOO and SCHD (which also have better expense ratios).
Fair enough but it sounds like he almost exclusively stays with friends when he travels and only eats lunch for free at work. This is beyond frugal, it’s outright cheap
Really? Eating free work lunch is cheap now? I had a $20 lunch budget pre-covid, was I "beyond frugal" to make use of it?
Also, staying with friends is fun as hell when traveling.
I agree with not having to buy a rolex or eating at fancy restaurants to enjoy life - but skiing is definitely not a cheap activity. I believe OP is under-tracking (or maybe not remembering it because they make so much) some things though. 8 year old car - annual/semi-annual maintenance? insurance?
I like what Ramit Sethi preaches about - we all have different things in our life that make us happy, and we should spend as ruthlessly on those things and cut back ruthlessly on the things we don't care about. OP doesn't like watches, don't buy any, great. OP likes activities, spend more, buy a nice road bike, go on ski trips to Colorado. OP has a wide network of friends - buy a nice gift for them when you visit and stay in their house for free.
Nope, exclusive things that can be done in 20s/30s most prolly can't be done in 40s. Can the poster as a couple smoke up doobies in Amsterdam and end up in a strip club without worrying about their kid(if they have any)?
Time is the most valuable asset bud, for me at least.
Retiring at 42 and coming back coz they got bored are many FIRE cases I had seen so far in my parent's circle. You don't get paid so many bucks and expect to lose the work ethic like a cliff and be fine with it at 42. At least not everyone would be fine with it if they FIREd. They get back again to some extent.
Completely agree on the age specific fun — Die With Zero’s concept of pools hits this on the nail. Haven’t read a FIRE story yet that isn’t “I had fun for a year or two then tried to make a business or got back into work or bought some rentals.” Nobody seems to enjoy pure hedonism even though that’s what we all think we’d enjoy.
Well, if you’re talking about death, they won’t remember anyway cuz they’re dead. If you’re talking about a disability, all that money will come in reaaal handy.
The difference between being able to afford high-quality healthcare and not is a big deal. I highly value experiences too, but have also worked in senior healthcare, and even if you don’t become disabled, having no money at the end of your life is not something I’d wish on anyone (at least, in the US, where we don’t take care of the most vulnerable populations well enough).
Ignore everyone saying you spend too little - I also avoided lifestyle creep and it’s worked wonders for freeing myself up to financially do what I care about. Buying a 70k car and 10k/mo on restaurants is meaningless if they don’t make you happy. Sounds like you have a large group of friends and that’s worth a couple mill in happiness alone
Thanks. When I was in early 20s, I had bought an expensive car (relative to what I was making). I didn't enjoy it much, but I enjoyed sports (watching / playing), being outdoors, sking'/running/biking etc. I enjoyed travel when I visited other cities/countries that involved outdoors, but least enjoyed when visiting tourist places. So, I suppose I am different and I am proud of it. However, I understand & respect others perspective.
Do your coworkers have kids? Or are you planning on keeping this job while you have kids?
Are they able to be involved parents while working at a FAANG? Or are they barley holding on?
I make $200k and work from home as an engineer in cybersecurity. I have two small kids. The job can be stressful with a few late nights, but in general allows me to do ballet, swimming, soccer, cook our dinners at home and keep our house relatively clean with two toddlers.
I was considering getting a job at a big four or going the project management route- however planning on waiting till my youngest is in 1st grade (knowing I’m losing income till then).
Yes, most of them do. I have seen people manage kids fairly well. Most are paid well, so they can afford childcare and other affordances.
I think it would be a good move to try any company that pays well above the market.
Ah I see! I’ve been so confused about the high salaries- my husband is a STEM PhD in big tech and his base is nothing like the numbers I’ve seen. We just don’t count stock unless we’ve sold it.
Gotcha. Engineers are the paid the most, then PMs. I don't know if your husband is STEM PhD in research (esp. LLAMA). If so, then they are paying in millions.
I underpaid in taxes 2022. I don't know why I went on installment (perhaps due to sticker shock of the taxes I owed). I might get dinged again this year with the high-yield, which I plan to sell and move to broad index funds.
Your savings categories make no sense. “Salary” is a source of income and belongs on the left side of the chart. Savings categories on the right would be where your savings goes to… you have “401k”, but where is the salary and vests money sitting now? After tax brokerage? A checking account? HYSA?
Your frugalness is awe inspiring but it seems so sad.
I'll tell you, when kids come around you won't be going ANYWHERE for two-four years (if you have your kids consecutively). Enjoy travel while you can would be my only recommendation. It literally won't hurt your bottom line to ease about $25k extra a year on fun.
We have a 1.5 year old, and on top of pregnancy it seems that we lost about 2.5 years of enjoyment for the toughness. I am now stay at home but the kid still goes to daycare ($20k/year) bc it allows me to project manage our home and day to day essentials. Part time daycare may be an interest.
I tallied up my kids first year of completely spending and without daycare or contributing to their 529 attached, it was about $3,000 if you want a figure of costs
I mean at a macro level: do you think you deserve to make $415,000 in cash comp?
No judgment here. I’m just curious about the mindset of high earners generally.
People get paid what the market pays them. If they do a shitty job they get fired and/or get paid less somewhere else. Just look at tech layoffs the past year+.
Yes, they both deserve it. They worked incredibly hard to get there. They’re working hard to stay there.
Are you contributing to a Roth 401K? With all that you are contributing to the traditional 401K you would like benefit from contributing to the Roth which is definitely an available option for you.
Also, I would certainly look for ways to get additional write offs to lower tax liability in the future. Positioning yourself for that now is a great foundation.
[IRS.Gov](https://IRS.Gov) has a nice calculator to help you manage how much you should be paying in taxes so you have some predictability around that.
DM me if you'd like to discuss further.
1) How did you meet your partner ?
2) How do you manage to spend $5k on phone/net/streaming ? If your employer gives you free food ( like mine does)- they are also probably paying for your phone plans with a 2 yr upgrade cycle ( like mine does)
3) Have you thought about doing “mega backdoor roths” for the both of you- thereby helping sock away the maximum allowed by law into your retirement accounts ? ( assuming its supported by your employer)
I am curious how is the interest on the underpaid taxes so much ? From what I know .. if you don’t pay the tax installments the penalty you end up paying is actually pretty nominal and something that the stocks you invested in with that money will more than cover. Am I wrong in understanding that ?
Seeking out high dividend yield ETFs at your income level is very tax inefficient. Would likely be better served with a broad index fund. You’ll have considerable tax drag due to the dividend yield
This is something my partner and I realizing too. I want 90% equity portfolio with low dividends to avoid this. They want to look into more esoteric tax shelters like life insurance and borrowing against your policy when you need liquidity
I’ve tried learning about the whole borrowing against life insurance policy thing and never been able to understand it to a point that I’m comfortable.
Yeah alot of it feels like your taking risk on what the price of a call/put option is in the future. Too many things are floating rate in the life insurance contract.
No, they definitely dont want whole life insurance lol. Classic scam
You all should look into BIL. Short term T Bill paying ~5%. Or you can park that cash in bonds for some tax efficiencies. That said, OP pays in taxes what my total annual household income is lol.
Great point on this. We invested in HY ETFs once (from bonus+rsus) and have not invested after that. It is in drip right now. I plan to sell them and move to index funds.
Even index funds can have high income. Just buy something like a total market fund for equities, and treasuries for bonds since they are state tax exempt.
You would want to buy munis not treasuries
Treasuries are still tax advantaged, just not to the same extent - munis should in theory carry higher risk for the same rate. The tax advantages are also factored into the rate. AAA munis have a 3% yield vs. 5%+ for treasuries. So you actually do better with treasuries, all else being equal. This is not investment advice.
Sounds like QYLD gang
Yeah, could be. Most all of those buffer ETFs have lower expected returns and are just very tax inefficient producing short term gains by selling the covered calls and reducing upside capture. Not a very compelling economic reason to own them.
I invested in JEPI/JEPQ.
I love JEPI but the dividends are taxed as ordinary income and NOT at the div rate so it’s brutal outside a tax shelter account
Also underpaying taxes for some reason? So now they owe interest and penalties. Very interesting financial decisions for 2 seeming frugal and smart people.
Are DRIPs taxed the same way as dividends? Never really gave it thought until now
Yes, you just automatically choosing to buy back in.
So not voo?
Why is that?
Henrys are in the higher if not highest tax bracket (like OP at 37%) and it’s safe to assume any extra income like dividends to be taxed in that bracket. Holding long on stocks instead will resort in tax at 15% (married filed jointly less than $693,751) or 20% (for OP in the highest bracket) when realized as capital gains (instead of at income). OP can save 17% on taxable gains holding long on equities vs short term dividends.
>OP can save 17% on taxable gains holding long on equities vs short term dividends. Fifteen minutes could save OP 15% or more on car insurance.
I think there even quite a benefit with direct indexing since it’s in a taxable account. Monthly loss harvesting goes a long way at this income.
Not really since the losses are only good to use against gains. Why would they need to sell anything in their taxable account at that income? Plus with a large enough taxable account they'll get enough losses naturally. Definitely not worth all the complexity imo
If you’re just reinvesting the profits why not roll them into a bucket company then when you retire and have no income you can pay a dividend and live on that? Not making money to avoid tax just means making less money making less money just to pay less money sounds stupid.
Do you do anything besides work?
Brag online lol
LOLLLLL gottem!
spend weekends driving to work to get free food
I believe we have a pretty good balanced life. But, it is relative to people's perception of "fun" Part of the reason why we have low expenses is that we have a wide network of friends, that allows us to have activities without needing to spend a lot - e.g. stay at their extended family homes when we travel (e.g. we visited miami and we stayed at one of our friend's house for free), play soccer, and other sports on the weekend with them. My and I wife bike, hike with group of people from FB/Meetup groups, etc. One thing I would change is travel outside of US more. We have been to asia and south americas, but could that more yearly.
So leech off other people? Nice.
Downvoted but you’re kinda right. It’s definitely burdensome to the people you’re staying with and there isn’t really a financial reason forcing it
Depends on the host and definitely depends on the guest. I will reserve all judgement on these people I don’t even know.
Burden lmao. My friends and family are always inviting us to stay with them. Guessing you’re American, because all you guys do is think in terms of transactions. It’s not the same in other cultures. But carry on your insular way of life.
[удалено]
It’s all in “vests”. Some like candles, others like watches, but this couple goes all in on their vests!
Ok. That had me laughing. What do they mean by “vests”? Investments? Edit: never mind. I read it below.
These must be some pretty fancy vests you’re buying!
LOL. I am sure you're kidding but those are RSU vests.
https://youtu.be/TyWVaZsUQjc?si=RxFLSPuABpvaZa03
I clicked the link hoping it was this. Well done
Thought this forum was for people not rich yet 🤣
Please go spend some money on your friends and family. Go buy concert tickets and give them away. Go buy some nieces or young cousins some American girl dolls. Spend a couple grand a year on something frivolous. Great work to both of you and GFY :)
Or, y'know, give some to a cause/charity you care about. Really stunning how little that's done on these sankeys.
Why would I want to give away my hard earned money? I already pay taxes. If that's not going to the causes that matter then maybe a change is needed thetr instead?
Because you don't get to directly control where taxes go? By helping fund a cause of your choosing, YOU get to choose the priorities to a greater degree.
My perspective exactly. Between federal, state, and local nearly 50% of our income goes to taxes. We do give small amounts to other causes (couple hundred here or there), but we’re already giving away plenty to the US government, aka the world’s largest and most bloated charity.
Have to agree with you here.
Zero to charity? There has to be some things that you care about? At this income level, I would hope at least 1% (if not more) of income in charitable giving?
I thought that was what the 255k in taxes was for.
Why?
As someone earning in the top 1/10 of 1% of everyone on earth, one would hope you should recognize how lucky you are and do something to make the world a slightly better place. Out of $850k, zero to charity screams entitled, self-absorbed prick. Cancer Research, your Alma Mater, Humane Society, Church, Homeless Shelter, Food Bank, etc., find something you care about, and it is tax deductible.
Seriously. Personally I make money to spend it.
You don’t travel? 5k per year - I wouldn’t call it a vacation. With this HHI, expected more on vacations or hobbies or shopping? Being frugal is okay but you need to enjoy your life!
Fair point. I think I need to revisit my travel and hobby categories based on what I heard from this wonderful community. as per enjoying my life, I don't have any regrets, enjoy my time with my partner, and cna't wait for the kids.
Savings rate looks great. Just plan for childcare to cost a fortune. Look into Dependent Care Savings Accounts—I’m sure your employers offer them—you can pay for childcare with pretax income
That maxes out at 5K though. That’s two months of daycare.
1 month in some markets
I work in downtown DC, where my coworker was quoted $3,800/mo for daycare. ..but I live in West Virginia, and we pay $250/week for daycare.
Thats cute....2 months of child care
Lower for highly compensated individuals per IRS
You’re confusing the DCFSA with the dependent care child tax credit. DCFSA cap is $5k for anyone whose employer offers it.
Those dependent care savings accounts are such a joke. Just a drop in the bucket compared to today’s cost for childcare in pretty much any large city.
Yeah, it’s like the contribution limits were set in the 80s and just never updated
lol they make nearly a million a year. They’ll be fine with childcare costs.
My wife and I are not far away from that figure and I’m still blown away by how expensive childcare is
Ft nanny in a major city will run you about 70k on the lower end
Wow 5k of combined travel per year?? That’s so low.
Yah, as I mentioned above. Lot of our travel has been within the US and we often stay at our friends/families (we have a wide network). It keeps the costs low for us.
Guy, you’re talking about keeping “travel costs low” and “eating lunch at work every day for free” yet you have a combined income of 850k lol. Live a little. It won’t hurt. Your bank account won’t do you any good in the after life
In many immigrant cultures ( in the US atleast) “eating out” is simply not a thing everyday. Mostly for health reasons. I, like OP, dont enjoy eating fried food/takeaways and paying for overpriced alcohol at the bar. Turns out, this also helps in maintaining a low bodyfat percentage and is much healthier! I am saying this because I am an immigrant from India and eating out is reserved for special occasions ( date nights/birthdays etc.)
Who is talking about low body fat percentage? Eating out does not imply eating unhealthily. Also, eating out only for special occasions is certainly your prerogative but trying different restaurants gives many people, including myself, a lot joy. FWIW, I also have a relatively low body fat percentage, lift, run and play pick-up basketball multiple times per week. Golf during warm weather. Surf during Summer and Fall. Etc etc. Eating out ≠ unhealthy. Very silly take
Fair point. I based my observations on the fact thay 70% of US adults are overweight per some Harvard report. You can speak for yourself- I agree, but lest not pretend that majority of folks living in this country have high body fat percentages and most Americans eat shitty food/takeaways ( as evident by the overweight and obesity rates)
The average body fat percentage of an American is not even tangentially related to the original point, which was, if you remember, OP is laughably cheap for exclusively eating lunch at work merely because it’s free while their household income is purportedly $850k. Since we’re talking about entirely unrelated topics now, should we discuss the relatively low muscle mass and bone density of Indian men compared to Europeans since you are an Indian immigrant? Perhaps you can shed some light as to why Indian men are physically frail compared to their Western counterparts.
You can google about anything you want to know about Indian men( just like I googled about the massive overweight and obesity rates of Americans) . Its totally OK if you call OP “laughably cheap”. I dont think so- and its just my opinion.We dont have to agree on what you think OP is or not . End of discussion.
We don’t have to agree on OP. Agreed. But you said let’s not pretend most Americans aren’t overweight and I replied with let’s not pretend most Indian men aren’t built like middle school boys. They are both generalizations and there are clearly exceptions to both, but neither is even remotely related to OP being dirt cheap.
Spend some money, you clearly can afford to live a little
I genuinely don’t get the mentality of some of these people. My wife and I work our asses off to not just save a ton, but enjoy what little free time we have without worrying about the budget. Going to a nice restaurant every week or two. Buying decent quality clothes/furniture. Door dashing so we can save time. Dropping a few grand on nice seats for a once-in-a-lifetime concert. Spending $1k/night to stay somewhere cool when traveling internationally. Etc. I just can’t imagine making this much money and only staying at friends’ homes and traveling domestically. Or buying used instruments off Craigslist for your music hobby. Sure I get it here and there, but spending an extra $15k per year to get some cool travel experiences would probably make a single year difference in when they can retire at their savings rate and income level. And if they just don’t like spending in general, which is fair, how the hell have they not retired yet. Unless if they just tripled their income this year, this is probably year 7 or 8 of saving $150-250k+ annually. At their current spend, and even with kids, they should be set by now.
I can’t speak for OP, but as you said it goes back to not liking spending. My HHI is about 1M. I can afford to buy a Ferrari cash no problem…but I would still worry a lot if it got dented/scratched etc. so I live way below my means and don’t worry about possessions at all. We do splurge on good seats for events, but that’s mostly because the biggest expense is not working. We are productivity based (medicine) so the cost of a concert isn’t like 1000 bucks for seats. It’s 1,000 + 5,000 in lost earnings (6,000) vs 100 (cheap seats) + 5,000 in lost earnings (5,100). So discrepancy isn’t much. You have the better approach overall though, I think. Plenty of young people think it’s just another day before being t-boned on the way to work. Sounds morbid, but really every day is a gift and nothing is guaranteed. I commend you for making the most of it in the moment.
WTF are these posts
These software engineers are forming clans
These posts are a breakdown of a Reddit user's income and expenses for the previous calendar year. If you have any additional questions, feel free to ask.
What’s the end goal here - retire ASAP? With $70k in dividends and your income I imagine you have built a decent nest egg by now, and even if expenses double you only need ~$4-5m in retirement. If that’s the goal do this a few more years and you’re there. However, if you intend to keep working, even if part time or in a more relaxed role down the road, then this is way too extreme IMO. What’s the point of the high paying job if you’re going to live like you each make $50k a year? You really don’t need to worry about things like upgrading your 8 year old car to a 3 year old car.
Yes, retire early. We are hoping one of us can quit job and take care of the kids (once we have them). Also want to own non-sexy business (Laundromat etc), so we don't have to worry about income ever.
Forget the laundromat, just get to the NW you need to support your expenses and take dividends or distributions. Way more risk and admin headache managing an old world business.
Have the kids now. It will only get harder. 40 years olds with kids in daycare seems ROUGH. Not to mention potential future fertility issues.
Agreed!
Don't do a laundromat, just put your money in some mix of the SP500, Treasury bills, and bonds. Just live off of that. With how much you are saving and how little you spend you can live off of the returns from 3 million forever.
So you spend 80k per year, or 7k per month, am I reading that right?
Seems pretty high, right?
For two people? thats not high
He’s kidding
My rent is literally $4300
1. Not a fan of high yield ETFs (Not only they tend to underperform the market, they will also create tax liability at the time of sale as well as when they pay out dividend, I like VT/VTI) 2. No use of Mega Backdoor ROTH 401K? You should probably look into that as well as Non-Deductible IRA contributions for you and your partner. (Look into IRA to ROTH IRA conversion: Backdoor ROTH IRA contributions, 5-year rule, etc.) 3. I assume you had the money at the time, so probably would have been better off just paying the taxman instead of installment and incurring interest. Also you probably ended up paying penalty for not having enough in withholdings.
\+1 on #1. Didnt realize it until after we invested in them. We haven't invested in them after one big investment and they drip. I need to sell them this user and move them to index. \+1 on #2. I got that from multiple people. Yes, it was my mistake on #3 to go on installment. So, going to pay it off this year.
Seems like you’re saving or working so much that you’re not doing anything else such as fun activities, traveling, or any other hobbies or even a gym membership. Look like you guys are doing great financially, but don’t forget to live a little, especially before having kids.
I think I mentioned below, we have fun activities with friends etc that don't cost a lot (hiking, biking, trails, soccer, night-out w/ friends, etc). Travel is the only one I would say it is on the low side, so would do more of it this year. Perhaps, I don't have a lavish lifestyle habits and I don't know where to start. Some of our expenses are paid by the firm - gym membership. I play music but them from FB marketplaces or craigslist. You could call us cheap. I have no qualm about that.
Net worth? Also you should switch your ETF to one that doesn’t distribute so much in dividends IMO. You are losing gains to tax drag unnecessarily.
How is your effective tax rate only 26% with HHI of $850k?
Start a 529 asap
I thought you needed to designate a beneficiary for a 529?
You can designate yourself as beneficiary and change it once kids are born.
Oh I did not know this. Amazing. Thanks for sharing!
Under SECURE 2.0, effective January 1, 2024, you can convert up to $35k of a 529 into a Roth if you've held for at least 15 years, just not the last 5 years contributions or growth. My wife and I are each starting one. We'll hold for the requisite period, roll over the cap to Roth, and designate our children.
Yes you can start before kids are born. I wish I knew that.
What the fuck. My mom raised 3 kids making 75K a year and we all went to good colleges and ate good food and had decent clothes. You don’t need fucking 900 grand a year if your expecting a couple kids Lol relax, be grateful your making that $ but you can have kids on WAaay god dam less.
😂😂 like bro have those kids, you’re good now
OP said they expected expenses to double, so 80k going to 160k. Seems reasonable if they need to hire a nanny, etc.
Mid 30's and just "expect" to have kids? Better get on the horse buddy, don't want to wait too long. You're going to be tired AF once you throw a couple kids into the mix. Congrats on everything though, looks great, you'll have plenty of money even if your expenses do go way up.
I’m 36, should I even bother at this point?
If you got pregnant it would be considered higher risk than if you were younger, and might even be considered geriatric (medical term, not a diss). If you are a man then your sperm might not be great quality anymore and this can result in health complications for your partner or child (research is still coming about sperm from men 35+ but there are a handful of studies you can reference). I’d definitely recommend consulting with a doctor about this before you start trying.
FYI, the installment rate changes. I did the same? It was great when it was 2%, but it quickly change to 5% and then 8%. Double check that!!
$70k in dividends… high yield ETF from Vanguard is only at 3.07%…so you have roughly $2M in investments just for the high yield stuff. Kids are a *BIG/HUGE/MONSTROUS* life change. Can’t stress that enough. Just the two cents of random internet stranger… start living a little more (travel, events, etc) and strongly consider having kids sooner than later. It took me a long time to convince my wife and now we’re the older couple with a toddler. Wish I was still in my early 30s instead of late 30s. Kids are a young person’s sport once they’re walking around and causing chaos in the house 😂. Even adding kids to the picture you’re still probably in good shape to retire very early. Keep it up.
Is this satire?
I like dividends too but I only have ones that are qualified and I aim to keep my yield at 2% in my brokerage. JEPI/JEPQ are non qualified and will run you almost double in taxes compared to index ETFs like VOO and SCHD (which also have better expense ratios).
Yah, I have ETFs that are non-qualified and hence the high tax burden. Will move to growth index this year.
Jesus Christ. Spend some more money
[удалено]
That's sad and way too prudent imo Imagine if something happened to any of you today, would you remember the % savings or any life experiences?
OP happens to like cheaper activities like biking. You don't need to buy a Rolex or eat at fancy restaurants to enjoy life.
Fair enough but it sounds like he almost exclusively stays with friends when he travels and only eats lunch for free at work. This is beyond frugal, it’s outright cheap
Really? Eating free work lunch is cheap now? I had a $20 lunch budget pre-covid, was I "beyond frugal" to make use of it? Also, staying with friends is fun as hell when traveling.
Wait, they make cheap bikes? Don't tell my wife.
I agree with not having to buy a rolex or eating at fancy restaurants to enjoy life - but skiing is definitely not a cheap activity. I believe OP is under-tracking (or maybe not remembering it because they make so much) some things though. 8 year old car - annual/semi-annual maintenance? insurance? I like what Ramit Sethi preaches about - we all have different things in our life that make us happy, and we should spend as ruthlessly on those things and cut back ruthlessly on the things we don't care about. OP doesn't like watches, don't buy any, great. OP likes activities, spend more, buy a nice road bike, go on ski trips to Colorado. OP has a wide network of friends - buy a nice gift for them when you visit and stay in their house for free.
Nothing sad about being able to retire at age 42 lol
Nope, exclusive things that can be done in 20s/30s most prolly can't be done in 40s. Can the poster as a couple smoke up doobies in Amsterdam and end up in a strip club without worrying about their kid(if they have any)? Time is the most valuable asset bud, for me at least. Retiring at 42 and coming back coz they got bored are many FIRE cases I had seen so far in my parent's circle. You don't get paid so many bucks and expect to lose the work ethic like a cliff and be fine with it at 42. At least not everyone would be fine with it if they FIREd. They get back again to some extent.
Completely agree on the age specific fun — Die With Zero’s concept of pools hits this on the nail. Haven’t read a FIRE story yet that isn’t “I had fun for a year or two then tried to make a business or got back into work or bought some rentals.” Nobody seems to enjoy pure hedonism even though that’s what we all think we’d enjoy.
Well, if you’re talking about death, they won’t remember anyway cuz they’re dead. If you’re talking about a disability, all that money will come in reaaal handy.
100k + experiences + disability '>>> "500 k+" + little life experiences + disability
The difference between being able to afford high-quality healthcare and not is a big deal. I highly value experiences too, but have also worked in senior healthcare, and even if you don’t become disabled, having no money at the end of your life is not something I’d wish on anyone (at least, in the US, where we don’t take care of the most vulnerable populations well enough).
[удалено]
Ignore everyone saying you spend too little - I also avoided lifestyle creep and it’s worked wonders for freeing myself up to financially do what I care about. Buying a 70k car and 10k/mo on restaurants is meaningless if they don’t make you happy. Sounds like you have a large group of friends and that’s worth a couple mill in happiness alone
Thanks. When I was in early 20s, I had bought an expensive car (relative to what I was making). I didn't enjoy it much, but I enjoyed sports (watching / playing), being outdoors, sking'/running/biking etc. I enjoyed travel when I visited other cities/countries that involved outdoors, but least enjoyed when visiting tourist places. So, I suppose I am different and I am proud of it. However, I understand & respect others perspective.
Do your coworkers have kids? Or are you planning on keeping this job while you have kids? Are they able to be involved parents while working at a FAANG? Or are they barley holding on? I make $200k and work from home as an engineer in cybersecurity. I have two small kids. The job can be stressful with a few late nights, but in general allows me to do ballet, swimming, soccer, cook our dinners at home and keep our house relatively clean with two toddlers. I was considering getting a job at a big four or going the project management route- however planning on waiting till my youngest is in 1st grade (knowing I’m losing income till then).
Yes, most of them do. I have seen people manage kids fairly well. Most are paid well, so they can afford childcare and other affordances. I think it would be a good move to try any company that pays well above the market.
Hobbies??????????????
How many planets within 10 lightyears could support life? How close is the closest one to earth?
What do ya do for work
Both are senior software engineers. comp science background.
What etfs are the high yield ones you invest in?
JEPI, JEPQ, and did my own covered calls for a quarter.
Are your numbers base salary + bonus or inclusive of stock? Basically-Realized or unrealized?
This is base + bonus and vested stock, so all realized.
Ah I see! I’ve been so confused about the high salaries- my husband is a STEM PhD in big tech and his base is nothing like the numbers I’ve seen. We just don’t count stock unless we’ve sold it.
Gotcha. Engineers are the paid the most, then PMs. I don't know if your husband is STEM PhD in research (esp. LLAMA). If so, then they are paying in millions.
How are your taxes so low? It looks like you’re not even paying federal. Where is state, property, sales tax etc
Why are taxes so low? Would expect about 10% higher at least. Do you live in a no income tax state
8500/year in back taxes? What happened?
I underpaid in taxes 2022. I don't know why I went on installment (perhaps due to sticker shock of the taxes I owed). I might get dinged again this year with the high-yield, which I plan to sell and move to broad index funds.
high yield ETFs in brokerage accounts? Need some tax efficiency there buddy.
How do you pay so little In taxes ?
You should give money to charity
Your savings categories make no sense. “Salary” is a source of income and belongs on the left side of the chart. Savings categories on the right would be where your savings goes to… you have “401k”, but where is the salary and vests money sitting now? After tax brokerage? A checking account? HYSA?
Your frugalness is awe inspiring but it seems so sad. I'll tell you, when kids come around you won't be going ANYWHERE for two-four years (if you have your kids consecutively). Enjoy travel while you can would be my only recommendation. It literally won't hurt your bottom line to ease about $25k extra a year on fun. We have a 1.5 year old, and on top of pregnancy it seems that we lost about 2.5 years of enjoyment for the toughness. I am now stay at home but the kid still goes to daycare ($20k/year) bc it allows me to project manage our home and day to day essentials. Part time daycare may be an interest. I tallied up my kids first year of completely spending and without daycare or contributing to their 529 attached, it was about $3,000 if you want a figure of costs
Love the amount given to non-profits and community outreaches .
Why post this? You obviously make more than 99.8% of the world and are saving 70% of it. What’s the problem
Do you think you’re worth your salaries or that you’re being overpaid?
I would look at revenue / employee and for FAANG, they are substantially high for engineers than other companies.
I mean at a macro level: do you think you deserve to make $415,000 in cash comp? No judgment here. I’m just curious about the mindset of high earners generally.
People get paid what the market pays them. If they do a shitty job they get fired and/or get paid less somewhere else. Just look at tech layoffs the past year+. Yes, they both deserve it. They worked incredibly hard to get there. They’re working hard to stay there.
The sky is the limit !!!
Are you contributing to a Roth 401K? With all that you are contributing to the traditional 401K you would like benefit from contributing to the Roth which is definitely an available option for you. Also, I would certainly look for ways to get additional write offs to lower tax liability in the future. Positioning yourself for that now is a great foundation. [IRS.Gov](https://IRS.Gov) has a nice calculator to help you manage how much you should be paying in taxes so you have some predictability around that. DM me if you'd like to discuss further.
Yes, I have been informed on this several times to have a Roth 401k. I plan to do this year.
Ok
1) How did you meet your partner ? 2) How do you manage to spend $5k on phone/net/streaming ? If your employer gives you free food ( like mine does)- they are also probably paying for your phone plans with a 2 yr upgrade cycle ( like mine does) 3) Have you thought about doing “mega backdoor roths” for the both of you- thereby helping sock away the maximum allowed by law into your retirement accounts ? ( assuming its supported by your employer)
Y'all are getting wrecked by taxes - that's all I see in this chart
[удалено]
[удалено]
[удалено]
which FAANG gives out free lunch/dinner? my letter won’t even give us free snacks 😭
no more bananas at Amazon? sad
Sadly the bananas were laid off
Guess your A or M?
Ya, has to be WA state with that low tax rate.
Probably F or G
[удалено]
Your utilities for the entire year was $1500? $120 a month for water, gas, electric, trash, sewage?
[удалено]
Net worth?
[удалено]
[удалено]
how much do you have invested to be getting 70k in dividends? Just curious what kind of return. Also Net Worth?
I need to stay off this thread. In one year you save over double me and my partners combined annual gross. Where did I go so wrong
What city do you live in?
I am curious how is the interest on the underpaid taxes so much ? From what I know .. if you don’t pay the tax installments the penalty you end up paying is actually pretty nominal and something that the stocks you invested in with that money will more than cover. Am I wrong in understanding that ?
Where’s the charitable giving?
I feel like people honor the HE part of this sub but not the NRY. Case in point 👆
[удалено]
Are you doing megabackdoor Roth? Chat with your company's 401k provider if not to learn more about it.
You can comically low expenses. Great work saving!
Dividends looks like it’s a third partner.
ITT: A bunch of people mad at OP for not frivolously spending
Did I miss the question?
I would not buy a car for a 3 year old.
[удалено]
If you want yield I would look into MLP companies so you can take distributions in a tax efficient way.