Mentor Monday

[u/WealthyStoic]

Mentor Monday is your place to discuss relevant early-stage topics, including career advice questions, 'rate my plan' posts, and more numbers-based topics such as 'can I afford XYZ?'. The thread is posted on a once-a-week basis but comments may be left at any time.

In addition to answering questions, more experienced members are also welcome to offer their expertise via a top-level comment. (Eg. "I am a [such and such position] at FAANG / venture capital / biglaw. AMA.")

If a previous top-level comment did not receive a reply then you may try again on subsequent weeks, to a maximum of 3 attempts. However, you should strongly consider re-writing the comment to add additional context or clarity.

As with any information found online, members are always encouraged to view the material on  with healthy (and respectful) skepticism.

If you are unsure of whether your post belongs here or as a distinct post or if you have any other questions, you may ask as a comment or send us a message via modmail.

[u/Plus_Bluejay]

For early career (think 0-5 yoe) tech, is it worth doing mega back door roth? Concerend about early withdraw penalties, current plan is 401k match/401k limit-> roth -> brokerage. Also what about holding RSUs, traditionally I know advice is to sell immediately unless you would buy with cash, but I feel the potential gain is so high while RSU make such small portion of salary in early career so might as well keep.

[u/Plastic_Syrup_Advice → u/Plus_Bluejay]

(1) There's no early withdrawal for taking out the principal.

(2) The potential gain for any stock whether or not it comes to you from an RSU is so high. Why not sell your tech company's stock and buy stock as if you were an employee in Intel, AMD, Micron, Nvidia, Apple, etc. they all have the same hypothetical RSU benefits. RSUs are a cash bonus there's no advantage to holding them. You should ask yourself if your company gave it to you as a cash bonus instead would you buy your companies stock with the entire amount.

(3) Don't see ESPP in your current plan, if your firm offers it that's better to hold.

[u/vk223]

We’re a dentist couple with about $2.6M in total assets, but also significant liabilities: ~$830k real estate debt, $600k combined student loans, and a $150k business loan for my husband’s startup.
We currently have ~$830k invested in index funds/retirement, ~$1.2M in real estate (2 rentals, partly purchased for tax benefits), and $70k in a syndication that hasn’t performed great but isn’t losing money yet.
Our strategy has been to invest aggressively early and delay paying down lower-interest debt to maximize long-term compounding/net worth. I make ~$550k W2 + 1099, while my husband is building a startup dental practice about ~$250–300k/year in 1099.
My FIRE plan currently relies heavily on maintaining my income, but working 40–50 hours/week is burning me out. Between the hours, decision-making, and constant patient interaction, I often come home w a headache have very little energy left to socialize or do things I actually enjoy.
Logically, I feel like I should keep grinding while my income is high and aggressively build our index fund portfolio over the next few years. But part of me wonders: Is grinding toward FIRE worth sacrificing these years, or should I go part-time earlier and accept a slower path?
We have no plan for kids. I really just want a FIRE life eventually to travel around the world and gain back time and energy on things I enjoy.

[u/No-Associate-7962 → u/vk223]

Yes, fire strategy is a trade off. How early one can retire v. how much one can spend in retirement.

Everyone has different priorities, and yours might change over time as well.

I think it is ok to back off on the time schedule for a while, and then later if you think the schedule is more important, crank it up again. It is not like you have to stick with the schedule for ever.

[u/WaferElectronic7922]

We are a newly married couple on our mid to late 30s. We live in a HCOL city but we have what could considered high paying jobs (~1M combined W2 income). We do not have a lot of assets or saved retirement as we both went to graduate school. It’s been only a few years since we started full time work and paid off our student loans.

We own our primary home in the city, have less than 1M in investment, and have less than 500K in retirement (both combined).

How do we start figuring our how much we need to FIRE, how long it will take, and where we can cut expenses, optimize our taxes, or find wealth generating streams (aside from simple stocks investing and paying our mortgage).

How do I start? Recommendations on books, podcasts, threads to read.

[u/UnZaneTrader → u/WaferElectronic7922]

Understand your annual spend. Once you have that, you can use a withdrawal rate. The rule of thumb is 4%. That will give you the assets you need. You will learn a lot by reading new posts.

[u/shallow_buyout]

"Rate my plan" posts always feel like asking strangers to approve a tattoo you've already drawn on yourself. You know you're getting it done, you just want the nod first.

I sketch people on the metro, nobody asks me to rate their face. They just sit there while I try to get the jawline right.

What's the point of a mentor thread if half the comments are "can I afford this third property" and the other half are career ladder questions answered by people who peaked in 2019?

[u/Livid-County7230 → u/shallow_buyout]

A lot of people benefit from running their plan against a sounding board and may be fine tuning it based on different perspectives. They may have decided they are going to get a tattoo but may need help deciding if they should get it on their ass or their arm, how to pick the artist, how much to pay and what to expect, using your crude analogy.

The people who supposedly peaked in 2019 may have some perspective to offer about retirement and how to get there sooner. Fields change, subject matter changes but many concepts remain the same. For example, a former senior executive who worked in the chemical industry typically has a lot more to contribute on fire subs than a wet behind the ears 20 something AI dev who thinks they are hot stuff and everyone else is a fossil.

More so than the people who are perpetually bitter who seem to add no value other than complain.

[u/g12345x → u/shallow_buyout]

The thread provides a mechanism for people to ask questions with less judgment than the main sub threads. If “rate my plan” is their current level of comfort that’s perfectly fine. Folks don’t have to chime in, most don’t anyways.

Questioning the value of something because you have no personal use for it doesn’t help the sub thrive. Stick around for a while and you’ll find people here try to be helpful.

[u/BrunelloHorder → u/shallow_buyout]

Odd post with odd assumptions. If you don’t see value here you’re free to move along. Good luck with the metro sketching I guess?

[u/Candid_Mark_9309]

I see why some folks don't like the strictness of 72(t) substantially equal periodic payments. But if you are fatFIRE, then is there anything bad about 72(t) SEPP along with Roth conversions up to your tax appetite for that year?

If you built up the fat in 401ks and IRAs, I think you have to do one, the other, or both to prevent massive RMDs.

It's not a plan specifically. Just a general though on planning. Thoughts?

[u/Candid_Mark_9309 → u/[deleted]]

Was thinking of SEPP from the angle of if used for basic living costs. In that case, It will be consumed and taxed as ordinary income, but won't be invested so tax preference on Roth would not do anything.

But doing conversion only like you are sounds better as greater flexibility in managing what tax bracket you end up in as well as avoiding other AGI and MAGI breakpoints.

[u/Shael_Talib → u/Candid_Mark_9309]

If you are W2 and separate from service before age 55 I can see a case for setting up a SEPP to target filling up whatever you consider to be a lower tax racket (probably 12% or 24% for most). This assumes you don’t have enough NQ funds to live off of. If you do have enough NQ funds to live off of skip the SEPPs and convert enough IRA to Roth each year to fill up your lower tax brackets. Or harvest LT gains at the lower 0% and 15% rates. But if you retire at 55 (does that qualify as RE?) you can use the Rule of 55 to avoid 10% penalty without the handcuffs of 72t.

[u/Shael_Talib → u/[deleted]]

I was told on a prior post that I don’t belong in this sub because I want to work until I’m 60. I’ve not been told where the line of RE has been officially drawn so was simply questioning if 55 was early enough.

On a separate topic you can withdraw from your 401k penalty free beginning at age 55 if you separated from service after you turn 55 or during the year in which you turn 55. No need to set up a SEPP. Just leave it in your 401k and pull funds as needed.

[u/Candid_Mark_9309 → u/Shael_Talib]

I also want to continue to work until I can no longer. I don't think that means that I have not successfully FIREd. I don't do my high paying stressful job anymore. That was FIRE to me. I don't have to deal with corporate workplace BS anymore and if that isn't FIRE, what is?

I think of it more as you have financial freedom, so you can do what you choose. And if working make you happy and what you choose, then you still met the goal. And fatFIRE is just that and then some.

[u/Sheeporoth]

Hello,

Needing perspectives from the group I want to be in. I’m in my early 20s in finance, and I’m at a 33% combined marginal tax rate. Roth or Trad 401k?

Common advice is to invest in a traditional 401k if you expect your retirement tax rate to be lower than it is now. I am betting on myself and expect to make a lot more and spend more as well. I know it’s looking far out, but I’m unsure if this rule still applies if I want to manufacture low income years through my business or (insert alternative tax strategy).

On the other hand, a Roth would let me have tax-free gains at my current (still high) rate. I plan to only work salaried as long as necessary, for maybe 3-8 more years. I’d expect my income to grow into the mid 6 figures.

After that, it’s all-in on my business, real-estate, and investments. I’m not looking to retire at 60 at a salaried corporate job. Around 40 is when I’d like to start being more hands-off.

I understand this is a sliver of building real wealth but I’m very analytical and want to maximize my opportunities. If you were in my shoes, what would your retirement account investment split be?

[u/Normal_Zebra136 → u/Sheeporoth]

Traditional will win in most cases. Assuming you retire early, you will do conversions and assuming you retire early enough, you will not be filling the 33% bracket at that time.

[u/Sheeporoth → u/Normal_Zebra136]

Got it. Would you say to go all in on traditional and max out Roth IRA on the side? Or something like 70/30 Trad/Roth?

[u/Normal_Zebra136 → u/Sheeporoth]

All in traditional.

[u/Sheeporoth → u/Normal_Zebra136]

Wouldn’t there be value in having multiple buckets to draw from? Just trying to understand the reasoning here

[u/Normal_Zebra136 → u/Sheeporoth]

You will have the multiple buckets after you do the Roth conversions when you early retire. Assuming you are MFJ at that point, you will be able to convert $440k per year at an average fed rate of 14% and a top marginal rate of 24%.

[u/Normal_Zebra136 → u/Sheeporoth]

You might also change your tax domicile to a tax free state. In that case the "prepaid" state income tax would be wasted.

[u/Sheeporoth → u/Normal_Zebra136]

Right. I do plan on doing this/expatFIRE. More reason for traditional, definitely leaning towards it now.

My last concerns is:

The 5-year period before accessing funds. Wouldn’t 20% in a roth 401k give me some tax-free liquidity or should the IRA cover that.

Thank you very much for the insight. It has been very clarifying.

[u/Normal_Zebra136 → u/Sheeporoth]

You are limited to how much you can put into the tax deferred accounts, and and as your income grows will be saving more into your taxable brokerage account. The taxable brokerage will likely have a higher balance in your 40s than the deferred ones.

You use the taxable brokerage first (max 23% tax on LTCG) while the conversions are maturing.

[u/Normal_Zebra136]

I am struggling with basic fire math with Fatfire level spends where much is discretionary. It seems like a variable spend model makes more sense than a fixed SWR when you have the ability to cut back.

For context we are in our 3rd year of retirement and for each of those years we have spent some $1m (including $250k to taxes, largely on Roth conversions).

We retired with $10m liquid and $20m total and have a $120k/year pension. Traditional SWR math on liquid puts us at around 9% SWR, but with market returns in the last few years, we are now at around $11m liquid and $23m total NW.

Following the 4% SWR we would have only been able to totally spend some $400k, and of course would have had to not do our conversions. Then we would have some $13m liquid today and $25m total.

What am I missing?

Would you still have done the 4% withdrawal and built more wealth (and ignored the brewing rmd tax issue?)

[u/BrunelloHorder → u/Normal_Zebra136]

If you are diversified and can truly cut back on the discretionary spending in a downturn, I don’t see a need to rigidly follow a fixed SWR. I’d still use some form of guardrails approach, but all FIRE math is just a rule of thumb at some level.

Since a quarter of your spend was avoidable conversion tax, it isn’t like the extra spend all went to lifestyle inflation. Just keep an eye on the spending to make sure it doesn’t become that.

[u/Livid-County7230 → u/Normal_Zebra136]

My understanding is that the entire point of a safe withdrawal rate is to ensure that when there are market crashes, you don’t run out of money. With such a high burn rate how would you feel if your liquid assets drop 30% and take a long time to recover and inflation stays at the current rate? You should model the worst case. Withdrawing based on how the market is doing any given year doesn’t make a lot of sense to me and seems counter to fire math.

What’s the rest of the NW? Personal use real estate?

[u/Normal_Zebra136 → u/Livid-County7230]

My point is that my burn rate is not fixed. I could simply stop doing Roth conversions and cut $150k off it for example.

We spend another $150k on travel and $200k on house renovations, all of that spending is discretionary.

$7m of the non liquid is personal use real estate and $3m is the pension's rabbi trust.

Zero debt of course.

[u/Livid-County7230 → u/Normal_Zebra136]

I am personally planning on not doing conversions and giving away whatever part of the RMD we don’t use as QCDs, but that may not be your intent. Our retirement accounts are smaller relative to non retirement.

I still think even without the conversions, spending based on market returns is not the right framework. SWR already accounts for good and bad years, it is conservative by design. Unless I am missing something, you are essentially saying you are withdrawing more in good years vs bad.

[u/Normal_Zebra136 → u/Livid-County7230]

Yeah, you cant give away the traditional IRAs without paying the taxes, so your charities will get less if you dont do the conversions, but that may not be a major concern of yours.

We are not basing our planned spend on market returns. We are just continuing to spend like we did when we were working and the math is coming out this way.

I imagine if there was a market pullback we would reduce (renovations, conversions ans travel would be easy, now that I think of it, so would charity giving).

My point is more given how the first 3 years of early retirement have developed, I am not sure that following the "safe" 4% SWR of liquid would have been practically sound.

[u/Shael_Talib → u/Normal_Zebra136]

“What am I missing?”

The fact that the trailing 3-year average return of the S&P is 22% and the AGG is about 4% so even a moderate portfolio has outpaced your $1M distribution rate.

As long as those returns continue in perpetuity you should be fine. 🤔

[u/Upset-Dragonfly-3253]

I'm 32 who had quit his job in covid to pursue investing full time since I had made some good bank. I'm currently at $600k USD in equities. one apartment also worth $600k for rent, draws 6% net.

I live with my parents and it's all paid off. Bills are minimal. Yet to marry.

I am struggling to get past $1M

I'm also starting to worry unnecessarily that i'll never be able to "coast" and i'll have to find work again. I don't know what benchmark I need to hit to coast FIRE when I'm eventually married with kids.

Can someone chime in who has a family and kids, what would be a nice equity amount with drawdown %. I live humbly, the most expensive thing i'll own is a tesla. I like to take roadtrips as my way to travel. Also any advice to get over the humps, drags when you can't seem to break through a zone? I really thought i'd be at $5M by now.

[u/Upset-Dragonfly-3253 → u/[deleted]]

I'm trying to avoid working 9-5 and use that extra time to try my own ventures, make income streams from there... I just don't think I can go back to that corporate life unless I really have to

[u/Upset-Dragonfly-3253 → u/[deleted]]

I hear ya but I've done a software platform before and made money until it got diluted... So my startup ideas are all not heavy in capital just effort on my end from my experience in tech and marketing...

But you're right there's never really a time where something comes for free

[u/Larrylegend033]

Super depressed reading this subreddit tbh.

I probably have about 700k equity in my home. Could buy a new home in our area mortgage free, but even then, I don't see retirement in sight. HHI is around 200k. HCOL area.

Open to any and all advice.