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Are investment properties good for retirement?
Decided to payoff my mortgage.
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For more context, we have about $8M invested. We’ve been maxing 401ks and backdoor Roth IRAs, but most of that is in taxable brokerage since we started late. Current annual expenses excluding savings is roughly $230k, with about $90k between property tax and mortgage (30 year refi in 2021). My spouse makes enough to cover expenses and taxes for now (with my salary being extra savings). We have a 1 year old, and we’re planning on public school. We’re not planning on moving.
If that’s the case I’d stick with short term or intermediate term CA munis. Avoid the long term for your use case.
The advantage of using your 401k space for bonds is then you can keep more stocks in taxable where they are more valuable, maintain overall desired asset allocation, and reduce RMDs from the 401(k) later. I only mentioned because you’d be adding bonds, otherwise what you said makes perfect sense re: maximizing growth.
I can never see myself with annual expenses of over $200k. What do pple have? Mine is under $50k and i cant seem to see how i can ever get to $200k in expenses. Just curious haha. Im on a $250k plus salary with expenses under $50k, of which about $15k is vacations a year. what are pples expenses?
You probably don’t live in a VHCOL area. Mortgage + Property tax alone is about $90k. $50k covers house, car, health insurances, utilities, other bills, groceries, miscellaneous expenses (but not major home maintenance projects). $90k on nanny right now (figure this will cover kids activities, house maintenance, increased insurance prices when no longer work subsidized, and increased vacations in retirement).
Subject Expert
VTEC looks like a pretty good option.
Counsel is right that you should probably use your pretax funds for bonds before going for municipals in taxable.
I will add that you should also consider paying off your mortgage. It will likely improve outcomes relative to keeping it. How much is the balance? Interest rate? Time left?
How much of a bond allocation do you intend as a portion of your portfolio?
Subject Expert
Wow, that is a big change in plans! Congratulations. :)
Yeah, the tax equivalent yield of munis may be a lot better than treasuries under some circumstances. Do consider the credit risk, though.