What to do with $250k in savings?
If things pan out this year, I’ll have roughly $250k in savings total (in 401k, partly invested at my work which is a HF, etc.). I’m 25 years old and single, and live in a high COL city. What would you do with this? Part of me just wants to quit, buy a $200-$300k condo in SoCal, and never have to worry about rent/mortgages (aka never being homeless) for the rest of my life. I have no plans to do a MBA or anything like that.
i cant be the only one wondering how you got 250k in savings already
See my previous thread “Sick of Being Beta”. A combination of no rent, no undergrad debt, and HF job out of undergrad (which has done well since I joined; albeit not in a linear fashion).
parents probablu.
250K is not nearly enough to "be fine in California", especially not if you account for CoL, taxes, and overall California lifestyle (lots of driving, going out, friends many miles away, having a family and some hobbies/activities cost more than elsewhere). If you are only looking at property in California as a safety net (not being homeless) and/or as an investment - I would consider it.
Otherwise - invest the money (not necessarily all of it, depending on investment) and keep your current gig. I know people who founded their own company, bought into successful franchises or laundromats in good locations, (..) while they were working and they made a profit. 250K is on the lower side for most commercial investments (I looked into QSR franchises a while ago and was shocked how much a McDonald's or Wienerschnitzel costs), but it should work out. Just make sure you do your research.
You don’t really have 250k - that 401k money should absolutely not be touched. It’s definitely not worth it’s gross value if you want to use it today. So discount that 40% and now you’re there.
Yeah, I back of the enveloped the 401k tax + penalty and it's something like 44% for early withdrawals. So whatever you have just multiply it by .56 to get your real number.
He fell for the 401k scam
Why don't you just buy a place for $60-80k in like Crockett Texas or San Augustine Texas or Pearce Arizona?
It’s not beyond my thought, tbh. Literally move out this high COL place and move where things are cheaper and simpler
Not sure about America but can't you not touch your money in your 401k? In Australia, you can't touch it until you reach retirement age, unless you use it in support of your first mortgage to some extent.
Why wouldn't you have invested 250k in ETFS?
property taxes are a bitch.
$250K is a good amount to give you some flexibility, it will help you take opportunities that others might not be able to.
you could take the $250k, move where ever you want and buy and hold some real estate, just a little at first to get the hang of it and then grow. you could create a very simple life that way that could still give you a skill set and experience for bigger opportunities in the future.
my wife and I are actually in the process of doing that exact thing right now, but we will still have some W2 income for a couple of years, we are moving to where we want to be though.
:]
That makes sense. I am in RE so it may seem easier for me. One thing I do know is that RE returns can be improved significantly if one can self manage, organize their own management instead of paying for it. paying for management ensures two things:
People are enthralled by "passive" income, but you spend a lot of money for "passive" with just a little bit of "active", things get better... unless you have scale, then you are a big fish to the management companies who will take your properties seriously.
The other thing I will say about REIT investment is they dont care about the after tax returns to the investor. Part of the significance of real estate is writing off interest expense and depreciation, done correctly, the after tax returns are significant.
my 2 cents.
How much of the $250 is cash? You should do yourself a favor and put a big fat value of $0 on your 401K until you are able to actually take distributions without penalty (and dont forget uncle Sam will take his pound of flesh too). IMO you need to keep working and compounding actual liquid cash before you entertain this idea.
You can invest it somewhere and earn even more
keep working...it takes 2mm to comfortable retire in the United states, and maintain a comfortable standard of living (buy and furnish an avg home, eat at normal restaurants, car lease payments, real estate taxes, utilities, pay for children's care, medical, education at a basic level, summer vacation for the family, etc... So, until you have 2mm saved, you are just not there yet. However, if you have 250k at 25, then you should be able to retire with 2mm in about 4-5 years assuming some avg earning progression ...which would put you in the top 1% of the population....so my advice is..go do that.
Being imprisoned in a 401k, it basically doesn't exist. You screwed up. Retirement accounts are basically a joke and do nothing more than hold your money hostage and restrict your investment choices for the dubious benefit of "tax-deferred" earnings, and possible employer contribution matching for 401ks. You only pay taxes on realized gains anyway, not paper gains, and the employer matching is not enough to justify not being able to access your own money whenever you want, so the whole concept is pretty worthless IMO.
Thus, the unfortunate answer to your question is: nothing (unless you want to take a massive "early withdrawal" loss).
401ks have a carrot and a stick. The carrot is that you get to defer taxes on the contribution and the growth from your peak earnings years until retirement when you have no income, and in the US, generally the more that you make in a given year, the bigger % of the total that you pay in taxes. (or get tax free growth in a Roth 401k) The stick is that you are locking up the money until 59.5+ in most cases or paying a significant penalty. Rarely does it make sense to pull money from a 401k early, presuming that you have enough liquidity to meet your daily needs. (and if you don't, then you have bigger problems)
Allocate some for a side business.
Use the remaining for investments.
If you're successful, now you have 3 sources of income
Wait for Boeing to bottom out and buy the dip!
What is your current allocation of this $250K? This is pivotal in order to receive a constructive answer. As others have stated, if its mostly locked up in your 401k, then the answer is do nothing.
If things pan out as they seem to be going:
~$100k liquid cash ~17k ROTH IRA -10k 401K ~120K investment in my HF
Yeah, you could actually withdraw all $27k in retirement funds without tax penalty since there is a $10k no-penalty 401k withdrawal for primary residence.
invest in LKQ while its still under 30
Invest it
you could've bought ~62 bitcoins back then and had $3,559,834.95 now
hindsight is a wonderful thing
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Find someone who needs the money and give to to them somehow. Good luck
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