MonsieurVox t1_jefmnpt wrote

It's justifiable to take a pay cut (to me) when:

- The pay cut is offset by something of similar or greater value. That may mean more work/life balance, a shorter commute, fully remote work, you name it. What is valuable to you may be worthless to someone else so it's an entirely subjective thing.

- It's a pivot into something that will have an eventual payoff. For instance, someone may be a general manager at a grocery store making $100,000, but make a career pivot into an entry-level software development position making $85,000.

- The higher paying job is taking a toll on my physical or mental health. Most jobs are going to carry some sort of stress, but if that stress is hurting me physically or mentally, the pay isn't worth it.

- The pay cut wouldn't impact my standard of living. I'd be totally fine taking a small pay cut if it didn't cut into my standard of living. The dollar amount depends on your income, of course. Taking a $5,000 cut making $200k is a lot different than taking that kind of cut making $25,000.


MonsieurVox t1_j2extbi wrote

It's an inherently hard question to answer because we don't know what future tax brackets are going to look like. Future tax rates are a key variable and is one of the most important factors, but without a crystal ball we have no way to make that determination.

I can give you my personal take: I'm in the 32% tax bracket and max out my Traditional 401k to lower my taxable income each year because I don't think I will be paying more than that in retirement. If I do, oh well, I'll pay some taxes in retirement. It's a personal calculated risk that I'm willing to take.

From there I put everything else that I can into Roth and after-tax investments to get me to a ~25% savings rate. My after-tax account will be my bridge account for early retirement (hopefully) and sinking fund for large purchases like house down payments and cars.

What I would personally do in your situation to help guide my decision is this: Take your salary and investment rate and run it out until the age you expect to retire. Assume an 8% rate of return, and a 3% average annual pay increase. It'll be less than that some years and more in others (promotions, etc.). Once you have that number, take 4% of it (the safe withdrawal rate) and compare that to what you'll be earning before you retire.

In that scenario, is 4% of your nest egg more or less than your annual earnings before retirement? If it's more, assuming tax brackets stay the same, you'd be better off going the Roth route because you'll get a pay raise by retiring and it will be completely tax free. If tax rates increase between now and then (likely), even better. If 4% is less than your annual earnings, then Traditional would be the best route (again, assuming tax rates stay the same). If tax rates increase between now and then, it gets kind of fuzzy.

Ultimately there's not a definitive, clear answer. What is clear, though, is that if you consistently contribute 15-25%+ of your income from now until retirement, you're going to better off than 90% of the population. Getting hung up on minimizing your tax liability in 30+ years is a bit of a fool's errand because there's no possible way to know the data you'd need to make the right decision: your income, your rate of return, and future tax rates. You can make educated predictions based on the past, but this is a true example of a situation where hindsight will be 20/20.


MonsieurVox t1_iy9w91u wrote

Yup, great point. Many people understandably want to get a nice car once they make a good income or get their first "adult" job, but fail to consider that it's not just the monthly costs — payments and insurance — but also the ongoing maintenance costs, fuel costs, etc.

And that's not even factoring in the opportunity cost that's associated with spending $1,500+ per month on a car payment when that could be going to investments.


MonsieurVox t1_iy9u3av wrote

I don't agree with him on everything, but I really like Dave Ramsey's rule of thumb on this: the value of your car(s) shouldn't exceed 50% of your annual income. So in your situation, you'd want to look at a car worth no more than $50,000. Dave would say to pay it in cash, but it's not completely in the realm of stupid to finance it for a couple years. Just don't get upside down on it.

Can you afford the monthly payment on a $100k car? Sure. But you'd be tying up a huge chunk of your income and net worth into a depreciating asset. In other words, it's a stupid idea. Just because you can doesn't mean you should.


MonsieurVox t1_iy97abx wrote

Thanks for the insight! I started working after the ACA was law so never dealt with that directly. Sounds like if someone spent a period of time unemployed and/or uninsured and developed a chronic condition during that period, that's when they were impacted.


MonsieurVox t1_iy8x5d5 wrote

It's actually pretty remarkable that companies are still operating under the mindset that they can get away with 2-3% raises and not lose a lot of talent. The days of decades-long tenure at companies is mostly gone unless someone a) really loves their company/work and/or b) has no other options.

EDIT: This theory isn’t accurate, or at least doesn’t tell the whole story. Thanks for explaining, everyone!

Tangentially related, I have a theory that is often overlooked that may account for a good chunk of long employment tenure that was common in the past. After the ACA (Obamacare) became law, it forbade insurance companies from denying coverage for someone with pre-existing conditions. If I understand this correctly, it would mean that if someone worked for Company A, had their insurance, then developed a chronic condition, they could be denied coverage at Company B's insurance plan if they switched companies. Maybe that's not the case, but if it is, that would explain why so many people stayed at companies they hated or that underpaid them; they were essentially stuck there unless they wanted to go without medical insurance.


MonsieurVox t1_iuig33j wrote

If you're young, in good health, and don't have a lot of regular medical expenses, the HDHP with HSA is one of the best investments you can make in your future.

  • HSA contributions are tax deductible (every dollar you put in through payroll deduction is a dollar you don't have to pay taxes on; similar to a Traditional 401k)
  • HSA investment growth is tax and penalty free if used for medical expenses (similar to Roth IRA)
  • HSA disbursements for medical expenses are tax and penalty free
  • After age 65, the account basically turns into an IRA that you can use for whatever you want.

The HSA plan is basically made for people like you.

Just note that the premiums do not go into the account. The premiums are what you pay for the insurance itself. HSA contributions are above and beyond that.

EDIT: One other thing that I would add is that this is not a forever decision. If you are expecting a year with a lot of medical expenses (e.g., if you find out you're having a baby), you can switch to the PPO for a year during open enrollment then switch back to the HDHP+HSA when things settle down. The HSA and all the funds inside are yours, regardless of if you maintain that particular plan, stay with the company, etc.


MonsieurVox t1_itlv2dm wrote

If you tune in to any country radio station, you’re probably not getting your father’s country. Old school country was rebellious, anti-establishment, often controversial. Listen to the lyrics of “Man in Black” by Johnny Cash. It’s anti-war, anti-greed, and brings attention to the downtrodden, the impoverished, and victims of war.

What you hear on the radio nowadays is redneck pop music. At best, it’s pop music with a steel guitar or a fiddle. It’s white washed with formulaic music, Mad Libs lyrics, and debated by committees. They steer far away from controversy or political topics, instead choosing lyrics that have to do with trucks, jeans, beer, and the beach.

If Johnny Cash, for example, was alive and in his prime today, he would likely be singing about topics like wealth disparities, school shootings, or the opioid crisis — not about trucks, women, beaches, or booze.

Of course, there are exceptions, and there are plenty of artists who still make great country music. Sturgill Simpson, Tyler Childers, so many others. But you aren’t going to hear those played at country dance halls or on most corporate owned radio stations.


MonsieurVox t1_isq6umq wrote

It was Radiohead for me. My friend introduced me to Radiohead with The King of Limbs, which isn’t exactly their most accessible album. Then I heard some songs from Kid A which, again, isn’t the most accessible album.

Then I heard ”Let Down” from OK Computer and their music clicked for me. From there I listened to the rest of that album, then In Rainbows, then revisited some of the albums and songs that I previously hadn’t enjoyed with a newfound appreciation.