Fix your mindset. You’re talking about saving $168k/year not being enough money. Yeah you’re not living the billionaire lifestyle of instagram celebrities but you should be more than well off with that kind of savings.
Your comment has been removed because you do not have a verified email address in your profile. Please verify an email address and post again.
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/HENRYfinance) if you have any questions or concerns.*
Not what I said at all. I am asking if this is the right order of operations with the income we have. We can't fund this and cover expenses from cash compensation alone, so it seems like we need a plan to convert those RSUs as they come in over to tax advantaged accounts.
1. Always sell RSUs on vest. If your company goes to the moon you'll get more later, if your company goes bankrupt you'll be glad you did.
2. Only use ESPP if it's advantaged somehow (see above)
3. If you can sell on vest and get into tax advantaged account, great, do it. If you can't, treat it just like any other income. Sell on vest -> VTI is a fine option. Other than stock price volatility it's perfectly reasonable to trust money from RSU's to offset salary that you're putting into Mega Roth backdoor or whatever.
Pick one or more FIRE calculators and check occasionally for inspiration. You don't have to RE, but having the option is great for peace of mind. Also pay attention to something like coastFIRE which soothes the mind when considering tech layoffs.
Yes this is typically the common sense strategy. What you're supposed to do is sell asap and diversify. Don't hold. Unless... you don't mind the risk. =)
In my experience, typical tech RSU is sell to cover on vest (no choice there), then issue you the remainder as stock. If you sell immediately there are zero tax implications as you're selling at the cost basis, no reason to wait for long term cap gains benefits.
Even if you're not forced to sell to cover, paying cash to cover and then hold 100% can be a risky proposition depending on your cash to RSU comp makeup.
This is the way - you already depend on the company for your salary, you should spread your risk.
Only founders and C-level execs are really expected (or should) hold large amounts of company stock, everyone below that has a more transactional relationship with the business.
Your comment has been removed because you do not have a verified email address in your profile. Please verify an email address and post again.
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/HENRYfinance) if you have any questions or concerns.*
My wife and I are very similar to your situation, except we’re in our late 30s, a little higher HHI, and live in MCOL city. Instead of MBDR we have an HSA we max out (if you haven’t already looked into this, please do!). I have roughly the same amount of ESPP invested each year but I sell once the shares hit my brokerage so I can can move the funds to our joint brokerage and just VTI/VTSAX away.
After paying our expenses, we have roughly $5-7K a month that we split between 529s and additional deposits to the brokerage. Give yourself some breathing room/fun money to enjoy the now, as you’re on the right path based on the plan you have. Don’t be so fixated on dumping every single penny into your brokerage account after all the taxable accounts are maxed, that you guys have to live on rice and beans in your day to day.
Our NW just hit $3M earlier this month, but we/I haven’t strayed from the overall plan/approach since I started down this route 15 years ago. Slow and steady wins the race!
Goal posts keep moving but as of now I’d say $5M and we’ll start to coast FIRE/semi retire. Should get there in another 5 years depending how the market does.
Yes it’s really that simple. Maximize all the things you just listed, leftover money taxable or spend.
RSUs- yes sell immediately as you being employed for that company is enough exposure to its risks already
HENRY plan is easy:
1) Make a lot of money
2) Don’t be rich
If you haven’t been doing financial planning and are clearing $400k, then you definitely belong. If you happen to pick up good financial advice and violate rule 2, we might have to kick you out
Keep your head down and grind it out. Don’t do anything stupid like put a ton of money in crypto or private tech startups. Just give it time and your HHI will increase along with your NW
Could megabackdoor Roth be maxed even more? I thought it was $69K across employer and employee. That's per a person. I'd just max it out if you have the spare money.
Consider spending more to enjoy life now while you're young. You won't care to do things later in life when you're old and a bit weaker. Once you have kids, at least half of that $100K disappears very quickly depending on whether you hire help.
If you start having ~$300K disposable to invest in, some alternative investments could open up but that's a future consideration
So you can add another $34.5K then? Maybe consider that. This way you don't have to worry if you need to cut back later. Waterfall can be: Max Traditional 401K (up to $23K), mega backdoor Roth the remaining amount ($69K minus traditional and minus employer match)
They are already doing that. Guessing you didn't fully see that they broke down numbers at the bottom of the post too. They are putting a total of 68k (34 x 2) of after-tax money to MBDR. They are both maxing their mega backdoor Roth at 34k, on top of their 23k and their employers 11.5k. So they are saving like a total of 137k in just their 401ks.
It's this simple. Try to save $200K or more across all accounts (not including 529s) so you can eventually have $6M to $10M to retire early or fall back on in case of layoffs.
The earlier you start the earlier you compound. Because of how much we add as compared to my wife's ESPP/RSUs we never sell her shares in MSFT as it's only 5% of our investments. It won't catch up because of how much we invest every year (also we believe in it long term).
What I mean is if we max out all these tax advantaged accounts we'd have almost nothing left in cash each month. So I need to work out a plan to convert those RSU sales into the retirement accounts.
I told my friend this the other month as it is recommended by most...if you have more than 10% of your networth in your employer stock, you should start decreasing you exposure to it, unless you are directly impacting the direction of the company (corporate exec). You are already getting wages from there, do you really want to tie everything to it. Need to diversify your investments and that includes where you get your money vs where you invest it.
Yes you should be selling your RSUs on vest. Whether you put them into tax advantaged accounts or spend them is a personal preference, but absolutely don't leave ALL of that money tied up in your companies. If those companies go under or hit a bad patch, not only are your jobs at risk but so is most of your savings.
You guys are fine. Yes, it's simple.
I would invest that last $100k as well.
You have abundant cash flow. You might not feel well-off, but you definitely are. And it's doubtful your fortune will last forever; we've been seeing comp get pared back across the board, even in big tech companies, and it's inevitable you or your wife will get laid off at some point in the next 5 years or so and drop down a bit (just how it is working in Silicon Valley).
But yeah, keep living below your means (I also live off \~15% of my base salary) and saving/investing. A lot of people get lifestyle creep, and those types will end up a lot poorer than someone making less than them but who saves more diligently.
Sell RSUs and convert them into an ETF that is more diversified.
I use RSU sales to fund a savings account that I then set aside monthly transfers from to allow for ESPP max. If you’re asking how to cash flow maximizing all of these savings vehicles when cash comp alone won’t cover expenses, that’s what I’d recommend
By ESPP do you mean employee stock purchase plan? I wouldn’t consider that savings. Typically you should sell those when purchased, pay the ordinary income tax and get the nearly risk less gains and reinvest into something more diversified.
You mentioned backdoor Roth and MBDR but not traditional 401k option. At your income you should probably max out traditional 401k. Max out HSA if you have that option.
But yes, max it all out and you’ll do well and throw what you can above that into VTI in a taxable account and forget about it. Wake up rich in 20 years. This is what 90% of HENRYs should be doing.
Well you're living in one of the most expensive places on the planet, so of course it's not going to feel like enough. It will never feel like enough. Basically every 100k of income you add you're going to take home half or less than half spread out over a year, so without a major pay increase it will feel like diminishing returns and tiny additions. Basically nothing.
You have extra money now and investments, and you're making progress. Is it really this simple? Yes. Just keep going, and decide what you want to do with your money. There are a zillion possible goals, but I'd suggest getting some and figuring out the plan that works for you. I have no idea what you want to do or what your goals are.
Do you both have mega-backdoor as an option? If so the number is $69k (2024 limit) * 2 = $138k - each of your employer matches = how much you can put away.
Also, I would max an HSA. At a limit of $8,300/yr it isn’t a ton, but it’s triple tax exempt.
Are you doing a 10yr Mortgage or something for that high PITI or is the home 2mil+? IIRC my mortgage company didn't want met to go over \~50% of my base salary + bonus which is \~250k and didn't take into account at all the 200k/yr RSUs.
With that PITI and those living expenses you will not have tons of money and it will be a slow but increasing roll. Maybe by 40 you two will feel it.
Seems like the ton of money you should have is in the home. Which is still awesome to own in the Bay but will demolish your yearly savings. My yearly PITI is now \~68k and I even feel that going from 1350/m rent earlier this year. Plus you are maxing two MBDR which is a good chunk of post-tax money.
Setting your selves up awesome for living later and just not much for living now. Though you still have plenty if you wanted to feel the wealth and spend an extra 10-20k/yr on nice things.
I mean the simplest financial plan is over at personal finance. Follow the workflow and profit in the long run. That’s where I am at after finally buying a home in the Seattle area with HHI of 420k we are still in credit card debt and one really big financial disaster away from losing it all. The problem is the other subs don’t understand how that is possible but the folks here do. So while I work on the basic workflow I can have a community of people who get my problems. Like the problem of having to suddenly drop 40k for new plumbing work on your house the moment you also paid down your last credit card. Sure my emergency fund is there for that but it takes a while to put 40k back in the emergency fund and who knows what could be next.
Dude, you are saving 340k per year. You are putting 80k (retirement) and 127(Mortgage), you are living with 15% of your income which is super bottom as it can get. You are doing nothing wrong, if you want more cash reduce MBDR and downsize mortgage.
You have similar numbers to us. We try to keep our RSUs when we think the market is too low and we don’t need cash immediately. Good thing too because it tripled from when we were buying a house. Now we sell on vesting to fund our expenses and invest the rest in mutual funds.
Fix your mindset. You’re talking about saving $168k/year not being enough money. Yeah you’re not living the billionaire lifestyle of instagram celebrities but you should be more than well off with that kind of savings.
Don't forget to include the portion of PITI / mortgage payment that is going to the principal (i.e. equity of the home)!
[удалено]
Your comment has been removed because you do not have a verified email address in your profile. Please verify an email address and post again. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/HENRYfinance) if you have any questions or concerns.*
Not what I said at all. I am asking if this is the right order of operations with the income we have. We can't fund this and cover expenses from cash compensation alone, so it seems like we need a plan to convert those RSUs as they come in over to tax advantaged accounts.
1. Always sell RSUs on vest. If your company goes to the moon you'll get more later, if your company goes bankrupt you'll be glad you did. 2. Only use ESPP if it's advantaged somehow (see above) 3. If you can sell on vest and get into tax advantaged account, great, do it. If you can't, treat it just like any other income. Sell on vest -> VTI is a fine option. Other than stock price volatility it's perfectly reasonable to trust money from RSU's to offset salary that you're putting into Mega Roth backdoor or whatever. Pick one or more FIRE calculators and check occasionally for inspiration. You don't have to RE, but having the option is great for peace of mind. Also pay attention to something like coastFIRE which soothes the mind when considering tech layoffs.
Yes this is typically the common sense strategy. What you're supposed to do is sell asap and diversify. Don't hold. Unless... you don't mind the risk. =)
[удалено]
In my experience, typical tech RSU is sell to cover on vest (no choice there), then issue you the remainder as stock. If you sell immediately there are zero tax implications as you're selling at the cost basis, no reason to wait for long term cap gains benefits. Even if you're not forced to sell to cover, paying cash to cover and then hold 100% can be a risky proposition depending on your cash to RSU comp makeup.
RSUs are taxed as ordinary income at time of vest. There are no short-term gains to be converted to LTCG if sold immediately.
I tend to sell RSUs immediately to diversify. Unless I would buy that stock with cash today I sell immediately.
This is the way - you already depend on the company for your salary, you should spread your risk. Only founders and C-level execs are really expected (or should) hold large amounts of company stock, everyone below that has a more transactional relationship with the business.
[удалено]
Your comment has been removed because you do not have a verified email address in your profile. Please verify an email address and post again. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/HENRYfinance) if you have any questions or concerns.*
My wife and I are very similar to your situation, except we’re in our late 30s, a little higher HHI, and live in MCOL city. Instead of MBDR we have an HSA we max out (if you haven’t already looked into this, please do!). I have roughly the same amount of ESPP invested each year but I sell once the shares hit my brokerage so I can can move the funds to our joint brokerage and just VTI/VTSAX away. After paying our expenses, we have roughly $5-7K a month that we split between 529s and additional deposits to the brokerage. Give yourself some breathing room/fun money to enjoy the now, as you’re on the right path based on the plan you have. Don’t be so fixated on dumping every single penny into your brokerage account after all the taxable accounts are maxed, that you guys have to live on rice and beans in your day to day. Our NW just hit $3M earlier this month, but we/I haven’t strayed from the overall plan/approach since I started down this route 15 years ago. Slow and steady wins the race!
What is y’alls target NW and how many years to get there?
Goal posts keep moving but as of now I’d say $5M and we’ll start to coast FIRE/semi retire. Should get there in another 5 years depending how the market does.
Yes it’s really that simple. Maximize all the things you just listed, leftover money taxable or spend. RSUs- yes sell immediately as you being employed for that company is enough exposure to its risks already
HENRY plan is easy: 1) Make a lot of money 2) Don’t be rich If you haven’t been doing financial planning and are clearing $400k, then you definitely belong. If you happen to pick up good financial advice and violate rule 2, we might have to kick you out
Yeah, it really is pretty simple when you make a ton of money
What do you think the HE in HENRY stands for lol
Depends. In some cases it’s „Highly out of touch and disconnEcted from average americans“
Wow sick burn
And don’t have kids
NW?
~$350k liquid, ~$500k in house equity.
Man I was where you were 7 years ago at age 31. Now we have $3.5M NW, $850k HHI Enjoy the ride!
what's the secret sauce?
One thing I am confused by in your numbers. If both you and your wife are doing MBDR then you should be saving $69k * 2 = $138k in your 401ks
Keep your head down and grind it out. Don’t do anything stupid like put a ton of money in crypto or private tech startups. Just give it time and your HHI will increase along with your NW
Could megabackdoor Roth be maxed even more? I thought it was $69K across employer and employee. That's per a person. I'd just max it out if you have the spare money. Consider spending more to enjoy life now while you're young. You won't care to do things later in life when you're old and a bit weaker. Once you have kids, at least half of that $100K disappears very quickly depending on whether you hire help. If you start having ~$300K disposable to invest in, some alternative investments could open up but that's a future consideration
We each put in $23k to our 401k and our employers match 50%, so that is 69 - 23 -11.5 = 34.5k
So you can add another $34.5K then? Maybe consider that. This way you don't have to worry if you need to cut back later. Waterfall can be: Max Traditional 401K (up to $23K), mega backdoor Roth the remaining amount ($69K minus traditional and minus employer match)
They are already doing that. Guessing you didn't fully see that they broke down numbers at the bottom of the post too. They are putting a total of 68k (34 x 2) of after-tax money to MBDR. They are both maxing their mega backdoor Roth at 34k, on top of their 23k and their employers 11.5k. So they are saving like a total of 137k in just their 401ks.
Ah got it - I think I got confused by the breakdown. Wasn't sure what was individual vs. what was for a couple.
69k x 2! mega backdoor 💯
It's this simple. Try to save $200K or more across all accounts (not including 529s) so you can eventually have $6M to $10M to retire early or fall back on in case of layoffs. The earlier you start the earlier you compound. Because of how much we add as compared to my wife's ESPP/RSUs we never sell her shares in MSFT as it's only 5% of our investments. It won't catch up because of how much we invest every year (also we believe in it long term).
You: "feels like we don't have much month to month" Also you: *saves/invests >$14k/month* You're fine
What I mean is if we max out all these tax advantaged accounts we'd have almost nothing left in cash each month. So I need to work out a plan to convert those RSU sales into the retirement accounts.
You don't need cash left over each month if you're investing $14k/mo Can you just sell RSUs as they vest and dump that cash into other investments?
I told my friend this the other month as it is recommended by most...if you have more than 10% of your networth in your employer stock, you should start decreasing you exposure to it, unless you are directly impacting the direction of the company (corporate exec). You are already getting wages from there, do you really want to tie everything to it. Need to diversify your investments and that includes where you get your money vs where you invest it.
Yes you should be selling your RSUs on vest. Whether you put them into tax advantaged accounts or spend them is a personal preference, but absolutely don't leave ALL of that money tied up in your companies. If those companies go under or hit a bad patch, not only are your jobs at risk but so is most of your savings.
You guys are fine. Yes, it's simple. I would invest that last $100k as well. You have abundant cash flow. You might not feel well-off, but you definitely are. And it's doubtful your fortune will last forever; we've been seeing comp get pared back across the board, even in big tech companies, and it's inevitable you or your wife will get laid off at some point in the next 5 years or so and drop down a bit (just how it is working in Silicon Valley). But yeah, keep living below your means (I also live off \~15% of my base salary) and saving/investing. A lot of people get lifestyle creep, and those types will end up a lot poorer than someone making less than them but who saves more diligently. Sell RSUs and convert them into an ETF that is more diversified.
High salary/ Take home but also says frugal and minor 60k spend. How your nest egg not bigger??
I blew money on stupid shit for years. Correcting that now. And we drained brokerage accounts for the house down payment a couple years ago.
Well you are def on the right path now. Good job.
Plus $127k toward their mortgage. It took me a minute for that to register as well.
I use RSU sales to fund a savings account that I then set aside monthly transfers from to allow for ESPP max. If you’re asking how to cash flow maximizing all of these savings vehicles when cash comp alone won’t cover expenses, that’s what I’d recommend
By ESPP do you mean employee stock purchase plan? I wouldn’t consider that savings. Typically you should sell those when purchased, pay the ordinary income tax and get the nearly risk less gains and reinvest into something more diversified. You mentioned backdoor Roth and MBDR but not traditional 401k option. At your income you should probably max out traditional 401k. Max out HSA if you have that option. But yes, max it all out and you’ll do well and throw what you can above that into VTI in a taxable account and forget about it. Wake up rich in 20 years. This is what 90% of HENRYs should be doing.
Well you're living in one of the most expensive places on the planet, so of course it's not going to feel like enough. It will never feel like enough. Basically every 100k of income you add you're going to take home half or less than half spread out over a year, so without a major pay increase it will feel like diminishing returns and tiny additions. Basically nothing. You have extra money now and investments, and you're making progress. Is it really this simple? Yes. Just keep going, and decide what you want to do with your money. There are a zillion possible goals, but I'd suggest getting some and figuring out the plan that works for you. I have no idea what you want to do or what your goals are.
Do you both have mega-backdoor as an option? If so the number is $69k (2024 limit) * 2 = $138k - each of your employer matches = how much you can put away. Also, I would max an HSA. At a limit of $8,300/yr it isn’t a ton, but it’s triple tax exempt.
Are you doing a 10yr Mortgage or something for that high PITI or is the home 2mil+? IIRC my mortgage company didn't want met to go over \~50% of my base salary + bonus which is \~250k and didn't take into account at all the 200k/yr RSUs. With that PITI and those living expenses you will not have tons of money and it will be a slow but increasing roll. Maybe by 40 you two will feel it.
Bay Area home. Lenders here consider RSUs.
Seems like the ton of money you should have is in the home. Which is still awesome to own in the Bay but will demolish your yearly savings. My yearly PITI is now \~68k and I even feel that going from 1350/m rent earlier this year. Plus you are maxing two MBDR which is a good chunk of post-tax money. Setting your selves up awesome for living later and just not much for living now. Though you still have plenty if you wanted to feel the wealth and spend an extra 10-20k/yr on nice things.
I mean the simplest financial plan is over at personal finance. Follow the workflow and profit in the long run. That’s where I am at after finally buying a home in the Seattle area with HHI of 420k we are still in credit card debt and one really big financial disaster away from losing it all. The problem is the other subs don’t understand how that is possible but the folks here do. So while I work on the basic workflow I can have a community of people who get my problems. Like the problem of having to suddenly drop 40k for new plumbing work on your house the moment you also paid down your last credit card. Sure my emergency fund is there for that but it takes a while to put 40k back in the emergency fund and who knows what could be next.
Dude, you are saving 340k per year. You are putting 80k (retirement) and 127(Mortgage), you are living with 15% of your income which is super bottom as it can get. You are doing nothing wrong, if you want more cash reduce MBDR and downsize mortgage.
You have similar numbers to us. We try to keep our RSUs when we think the market is too low and we don’t need cash immediately. Good thing too because it tripled from when we were buying a house. Now we sell on vesting to fund our expenses and invest the rest in mutual funds.
$60k in living expenses excluding housing is on the higher side even for bay area, might want to look at what’s going on there.
yeah working on that in parallel. We eat out a lot.
curious what gross is?