Actually, one of my credit unions is offering 2.75%. I shopped around a bit.
I looked at savings interest rates too. I have 3 more months to decide.
That same CU is paying like 0.5% in checking but it goes to 1.375 in the savings… guess what got transferred to savings today?
raindrops make rivers, right?
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You spend $72k/year, but only $17k of that was on credit cards? Everything but mortgage can be charged. If you put more of your spend on a card, maybe a better card would be worth it. Maybe.
No, 17k is year to date. So let’s just say 35k for this year, then 25k for living expences. So 60k that I can track easily. No vacation this year yet. One other card I use is the chase Ink, for business. Gives 5% back on cable, cellphone and the like, and other things like I think staples and such. I auto debit out cellphone, cable and Netflix to it and auto pay it each month. Nearly $15 month / $330 back a year.
I’ll toss out another option – mortgage your house.
If you want some income and want to continue to put into the DW 401k, then I think a mortgage might be an option to consider – probably a HELOC or HE, rather than a full mortgage, but whatever… I don’t have any issues with having a mortgage until I die… some do.
The funds from the mortgage could be put into a money market or CDs and drawn upon (like income) as you need it. DW will be in the 12% tax bracket with her income. If you withdrew from your IRA / 401k at the rate you state, then some of your combined income would be in the 22% bracket (assuming filing jointly).
So the savings on taxes might outweigh the interest on the mortgage. I’d have to dive deeper in the math and you’d have to dive deeper into your tax situation to be sure. Others here might have a gut feel for this.
Whenever this plan doesn’t work anymore, you can just pay it off and you are done.
I appreciate the input, but Im not sure how thats workable. Id have a mortgage, so Id have to pay it back on that lump sum. My credit unions HELOC rate is 4.5%. Putting the money in the bank might get me 2%. Putting it in the market or bonds? Wouldn’t I be better to borrow on margin (Which Id never do)?
You had a good point on the tax bracket. Ill have to explore that.
No. I was just trying to get the math done on decreasing my wife’s maximum contribution and living off that and a partial draw from our IRA, or just draw more from the IRA and leave the 401k contribution intact. I believe I’ve made the decision that it will be better to take less from the IRA and decrease the contribution to get the maximum company match. Its always good to have a few eyes on a problem.
Thanks
Off the top of my head I think no. I recall contributing to my solo 401k from my S Corp last year and we did payroll for that purpose. That payroll had FICA taken out.
I consider it one of the weaknesses of the solo 401k because one could otherwise take the money as a distribution, avoid fica, and enjoy 20% tax break thanks to new tax law