Taking 50% of bonus to account for NYS/Federal taxes. Yes, a little apples and oranges then vs. gross income numbers.I don't understand the highlighted portion above. If you save 100% of a $300k bonus, how does that only equal $150k?1) Gross income is ~$600k. Give or take. Could be higher, could be lower. Around 50% of my compensation is year-end bonus (of which 20% of the bonus is in company stock which vests over 4 years).
2) Annual expense is probably $120-$130k. Really rent is only fixed cost.
3) I save 100% of my bonus each year. So, if bonus is $300K, can assume I save $150k. Then I save probably on average $4k a month (including 401k contributions). So $48K. So all in think about ~$190k.
These are rough numbers
If your monthly expenses are ~$10k, then a $25k emergency fund is only about 2 months of expenses. Up to your own preference and personal risk tolerance whether that is sufficient for you. You have a sizeable taxable account, so if stuff really hit the fan, you'd have some runway (even in a 50% market downturn), but you'll have to assess how you'd feel in that situation.
I'd personally be buying Series I Savings Bonds as a way to extend tax-deferred space in your high tax brackets and build up some inflation-protected cash that can be an extension of your EF. You can easily buy $10k/year at Treasury Direct and $5k paper bonds with your tax return if the gov't owes you a refund. I would buy the $10k before the end of April so that you lock in the current 1.3% fixed rate (it ends on May 1). There's a huge mega thread about I bonds if you want to learn more, or check out the Tipswatch blog.
If you plan to stay in NYC for a while, it may be worth considering using a NY muni bond fund in taxable to hold some of your desired fixed income allocation. It is unclear to me whether you want to hold 20% or whether that's simply the case now because of the bonus cash that you just received but plan to invest in equity funds.
Makes sense on I bonds, but I guess I am less inclined to have that high fixed income in my portfolio. I realize the downsides (the swings) to mostly all equity. Would rather have all equity and then my emergency savings in money market fund if that makes sense. Just have that much in cash right now from the bonus I got.
Good point on emergency savings fund - my monthly rent is $4,900, but I could cut back dramatically on all other spending if needed to. I would say it is really more $7k monthly with more flexibility. You make a good point though, I might bump up emergency fund some.
Statistics: Posted by controlledmonkey1 — Mon Feb 19, 2024 2:23 pm — Replies 13 — Views 607