Personal Investments • What to do with Emergency fund

How many months of basic living expenses does $200k amount to? In my opinion $200k for an emergency fund seems excessive. Usually around 3-6 months of basic living expenses is considered reasonable for an emergency fund.

I suggest that some of that $200k be invested in some fashion.

Use $$$ from the $200k to pay off the remaining CC balances from the car loan next year. What do you expect the remaining CC balances to be then?

What to do with Emergency fund

200k (100k in HY 5.5% account) and other in Vanguard trading acct sitting in cash with similar savings rate.

Age
Upper 40’s with two WHSE jobs making $115k

401k- 550k (95% vinix/5% bond)

. . . . . .

I’ve probably lost 70k in individual stocks in the past 15 years so I really don’t want to go that route so EF has been sitting and have not had to use it and it just keeps growing.

With all this card debt for next 12 months I will not have any extra $$ per month.


What would you do with EF?

What was your tax bracket, both federal and state, for your most recent tax returns? What is your tax filing status?

With $115k annual income it looks like you may be in the 22% tax bracket link, so maximizing 401k contributions can give you a nice tax deduction.

Are you making maximum annual employee deferrals ($22.5k for 2023, $23k for next year) to your 401k account? If not then I suggest that you increase contributions to the maximum and draw down the $200k emergency fund to pay living expenses you would ordinarily have covered from your paycheck.

How much do you currently contribute annually to your 401k account?

In my opinion in your 401k account Vanguard Institutional Index I (VINIX) ER 0.035% is an excellent choice for investing in U.S. stocks. What bond fund do you use in your 401k account? Please give fund name, ticker and expense ratio.

You might consider a larger than percentage in bonds than just 5%.

With $115k annual income it appears you are eligible to contribute to a Roth IRA link. I suggest that you open a Roth IRA at a low cost provider like Vanguard, Fidelity or Schwab and invest in very diversified index funds with very low like ratios. You can contribute $6.5k for tax year 2023, and $7k in tax year 2024. Use some of the $200k to enable these contributions.

Also I suggest that in your Vanguard taxable brokerage account you invest some of the $200k in very tax-efficient stock index funds like Vanguard Total Stock Market Index Fund (VTSAX) ER 0.04%.

Maximum annual contributions to your 401k and Roth IRA should be a priority over contributions to the taxable brokerage account.

Wiki article, Prioritizing investments.

Thanks for the feedback..

I'm going to be short by a bit. i think i'm right at 21k for 401k contribution.

Since i plan to finish cc debt in the 12 months i was not going to max out 401k next year but i guess that seems stupid to do.

It's great to hear you will zero out the CC debt for the car loan in the next 12 months.

From the $200k I suggest that you:
1) use $2k to pay living expenses you would ordinarily cover from your paycheck, to enable maximum deferrals of $23k to your 401k in 2024;
2) use $6.5k to make the maximum annual Roth IRA contribution for the 2023 tax year. You can make that contribution for the 2023 tax year anytime before April 15, 2024; and
3) use $7k to make the maximum annual Roth IRA contribution for the 2024 tax year.

That is just $15.5k out of the $200k.

How much would it take to cover 3-6 months of basic living expenses? How safe is your job, your employer, and the industry you work in? Do you feel that amount would be reasonable for your emergency fund?

Statistics: Posted by lospecv — Sat Dec 23, 2023 12:50 am — Replies 14 — Views 894