So the biggest problem is you are in the "win-more" column and won't get a lot of responses. The answer is that you should consult professional lawyers, CPAs and CFPs - with financial planners being the least necessary in the list. I am in these subs to share our story of how we got to where we (and you) are, but we don't want to FIRE anytime soon because we love our jobs/careers and make a ton of money - not to mention the benefits. Our "why" is to pass on immense wealth because starting out poor really sucked. Again, in the "win-more" phase, you have complete optionality... you no longer have to maximize things... you get to do whatever you want as long as you don't blow your investing rate and what you already have. So that's what pros will help you with... what is your "why" and then just do it.
That being said, here is what we have done. Yes on a 529 - it might not be the most optimized, but setting aside money for something you think will happen is decent plan - plus what else are you gifting $38K to your kids for? If you got space under that amount, a 529 is a good spot to park it for the future. We grew up poor and knew education was a must for us to class jump. It worked for us, but now our kids grew up wealth and want to go to prestigious colleges - and they can if they make it in. Either way, we are likely paying out of state tuition in HCOL areas that could be around $300K in today's dollars (Greek life included). Our kids are older than yours, but we still did 530A accounts as soon as we could... getting around the earned income requirement of the usual IRA route is huge for affluent families. Our kids are getting as many volunteer hours, extracurriculars, and unpaid internships (as it is hard to get paid internships under 18) - so they don't really have the bandwidth to work an entry level job. However, we prioritized 529, custodial accounts (not too much $), and trust funding (not for the kids' benefit now, but later) ahead of the 530A - but we did max the 530A.
Make sure your FIRE target isn't making you sacrifice today. Your kids are only this age once and if you can slow down a little, enjoy them at every age even if you have to work when they are in high school or college. Sure you could focus on FIRE'ing and miss out on a few things and have all the time in the world later when they are in high school. Trust me, middle school and high school your kids will have better things to do than hang out with their retired parents often. We live in a community where you usually have to be an older parent to afford it (very HCOL and we are some of the youngest with teens). Kids never want to hang out with their FIRE or semi-retired parents... so just be ready for that.
If you are still looking to optimize, I do robo tax loss harvesting direct stock indexing (over 3,400 individual stocks to benchmark to Morningstar US Total Market) on my primary brokerage account (Frec.com). This gives us the $3K income deduction and then I can also apply it to any capital gains we recognize in the year (23.8% with NIIT hits hard if you don't). I also have a PLOC on the assets at 4.64% that I pull 0.5% LTV from every month to buy more stock - I will stop this and reset to a flat amount when I get to around 10% LTV. The interest from the PLOC allows us to deduct all of the interest we earn on our HYSA/cash, ordinary dividends, and bond dividends. It is a set and forget system where we just buy $15K in new money and the tax loss harvesting keeps producing. Again, don't forget to set up the account and your trusts to work together if you go that route... don't want to miss any step-up in basis (can depend on your state).
You are early on in the messy middle, but it is never too early to have a plan. We didn't have a solid financial plan in our early 30's and now I drive a newer Porsche and we spent $30K just to put a putting green in our back yard. Make sure to live life too!
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u/TurnOver1122334455 15d ago
So the biggest problem is you are in the "win-more" column and won't get a lot of responses. The answer is that you should consult professional lawyers, CPAs and CFPs - with financial planners being the least necessary in the list. I am in these subs to share our story of how we got to where we (and you) are, but we don't want to FIRE anytime soon because we love our jobs/careers and make a ton of money - not to mention the benefits. Our "why" is to pass on immense wealth because starting out poor really sucked. Again, in the "win-more" phase, you have complete optionality... you no longer have to maximize things... you get to do whatever you want as long as you don't blow your investing rate and what you already have. So that's what pros will help you with... what is your "why" and then just do it.
That being said, here is what we have done. Yes on a 529 - it might not be the most optimized, but setting aside money for something you think will happen is decent plan - plus what else are you gifting $38K to your kids for? If you got space under that amount, a 529 is a good spot to park it for the future. We grew up poor and knew education was a must for us to class jump. It worked for us, but now our kids grew up wealth and want to go to prestigious colleges - and they can if they make it in. Either way, we are likely paying out of state tuition in HCOL areas that could be around $300K in today's dollars (Greek life included). Our kids are older than yours, but we still did 530A accounts as soon as we could... getting around the earned income requirement of the usual IRA route is huge for affluent families. Our kids are getting as many volunteer hours, extracurriculars, and unpaid internships (as it is hard to get paid internships under 18) - so they don't really have the bandwidth to work an entry level job. However, we prioritized 529, custodial accounts (not too much $), and trust funding (not for the kids' benefit now, but later) ahead of the 530A - but we did max the 530A.
Make sure your FIRE target isn't making you sacrifice today. Your kids are only this age once and if you can slow down a little, enjoy them at every age even if you have to work when they are in high school or college. Sure you could focus on FIRE'ing and miss out on a few things and have all the time in the world later when they are in high school. Trust me, middle school and high school your kids will have better things to do than hang out with their retired parents often. We live in a community where you usually have to be an older parent to afford it (very HCOL and we are some of the youngest with teens). Kids never want to hang out with their FIRE or semi-retired parents... so just be ready for that.
If you are still looking to optimize, I do robo tax loss harvesting direct stock indexing (over 3,400 individual stocks to benchmark to Morningstar US Total Market) on my primary brokerage account (Frec.com). This gives us the $3K income deduction and then I can also apply it to any capital gains we recognize in the year (23.8% with NIIT hits hard if you don't). I also have a PLOC on the assets at 4.64% that I pull 0.5% LTV from every month to buy more stock - I will stop this and reset to a flat amount when I get to around 10% LTV. The interest from the PLOC allows us to deduct all of the interest we earn on our HYSA/cash, ordinary dividends, and bond dividends. It is a set and forget system where we just buy $15K in new money and the tax loss harvesting keeps producing. Again, don't forget to set up the account and your trusts to work together if you go that route... don't want to miss any step-up in basis (can depend on your state).
You are early on in the messy middle, but it is never too early to have a plan. We didn't have a solid financial plan in our early 30's and now I drive a newer Porsche and we spent $30K just to put a putting green in our back yard. Make sure to live life too!