It’s tax season and this is a good time to review how my retirement accounts performed last year. I have a 401k (traditional and Roth) plan through my current company, a rollover traditional IRA from my previous company and a Roth IRA that I opened over a decade ago on my own.
June was a not bad month for passive income. Compare to the third month of last quarter, passive income increased by about $100. I picked up 50 more shares of F and 40 more shares of MYC this month.
May was a bad month for passive income. Compare to the second month of last quarter, passive income decreased by about $85. I picked up 20 more shares of GPS and 50 more shares of MYC this month.
The third step of my five year plan to FI/RE is to become an accredited investor. Given that most of my assets are tied up in my primary home, and the primary home does not count as part of the assets required to be an accredited investor, I have some work to do. The requirements to become an accredited investor is to have an annual salary of at least $200K for singles and $300K for married couples, or have a net worth of at least one million, not counting your primary home. For me to achieve this, that means I need to invest, invest and invest in the stock market.
Some of my ex-coworkers lost big in the tech bubble in 2001 and that scared me from heavily investing in my early years. The worst part was a couple of them bought their options to hold, and then they got laid off. They ended up with a huge tax bill and no salaries to pay. Luckily, I just started working, so I didn’t have much to lose. I probably loss enough to buy a nice BMW, but not nearly as much as some of my older c0-workers.
I funded my 401k when I started my job, but I was not maxing it out. I was putting all my savings in a money market for a down payment. It was not until 2006 that I started to max out my 401k, and around the same time funding a Roth IRA. When the market crashed around 2008-9, that’s when I slowly got back into the market, and picked up a couple of index funds and value stocks. I bought my home in 2006-7 with a ~40% down payment, so that cleaned out my savings. And as some of you know 2006-7 was the peak of the real estate market in the SF Bay Area, before it crashed. Strike 2! So far I had the worst timing in the real estate market.
After refinancing my home four times, I am down to about a 15% loan-to-value, and a monthly payment that’s less than 1k. At the same time, I have also built a hefty 2 to 3 years emergency fund and invested about 1 year worth in I-Bonds. At this point, I don’t need more cash cushion, unless I want to invest in another rental. But with the Las Vegas rental situation, I am turned off by the idea of being a landlord again. Who knows? When my boyfriend and I do move in together, I do want to eventually buy a bigger place to live. If I do, then my current place will be my next rental.
My plan for the next five years with the extra cash I have each month is to invest, invest and invest in index funds, REITs, and dividend stocks. I am open to any kind of investment that gives me a high return in dividend or interest. I have not started the peer-to-peer lending, but I might consider doing it in the near future. I am also looking into investing in crowd funding in large scale real estate investments. This is after I pay off my monthly mortgage payment and after I invest in muni bonds in step 1. The stock market is almost back at it’s all time high again. I hope third time is the charm and leads me to FIRE. I am excited what the future holds.
I have been contributing to my retirement accounts since I started working after college. The first company I worked for does not have a 401k match, so I only contributed about 5-8% of my starting salary. After my company was bought, the new company provided a 50% match up to the first 6% of my salary. From that point on I have contributed the maximum into my 401k. The new company gave me two options for my old 401k, to withdraw all the money from the account or convert it to a Traditional IRA. I chose to convert the old 401k to a Traditional IRA.
March was a decent month for passive income. Compare to the second month of last quarter, passive income decreased by about $40, but this is largely due to the extra year-end dividend distribution in December. Last month I picked up 25 shares of LLY. My first purchase was at $71.25 and when it dropped to $68.71, I picked up more shares. I also picked up another 50 shares of MYC.
Is it always wise to refinance when the rate offered is lower than your current mortgage rate for the same terms?
Provident Credit Union came to my company and offered a fix rate of 2.850% for their 10 and 15-yr term mortgages. As an employee of my company, Provident was discounting another 0.125%, which lowers it 2.75% for a 10 or 15-yr loan. I was overjoyed since I have been looking for another opportunity to refinance my mortgage for awhile now. My current mortgage is at 3% for a 15-yr loan.