Blogging Fusion Blog Directory the #1 blog directory and oldest directory online.

We on Fire

Home We on Fire

We on Fire

Rated: 3.00 / 5 | 79 listing views We on Fire Blogging Fusion Blog Directory



General Audience

  • KaiM
  • January 18, 2019 11:01:29 PM

A Little About Us

Want to retire early? Looking to be financial independence? Join us on our journey to F.I.R.E. We post tips and tricks for those we want to attain early retirement.

Listing Details

Listing Statistics

Add ReviewMe Button

Review We on Fire at Blogging Fusion Blog Directory

Add SEO Score Button

My Blogging Fusion Score

Google Adsense™ Share Program

Alexa Web Ranking: 457,911

Alexa Ranking - We on Fire

Example Ad for We on Fire

This what your We on Fire Blog Ad will look like to visitors! Of course you will want to use keywords and ad targeting to get the most out of your ad campaign! So purchase an ad space today before there all gone!


notice: Total Ad Spaces Available: (2) ad spaces remaining of (2)

Advertise Here?

  • Blog specific ad placement
  • Customize the title link
  • Place a detailed description
  • It appears here within the content
  • Approved within 24 hours!
  • 100% Satisfaction
  • Or 3 months absolutely free;
  • No questions asked!

Subscribe to We on Fire

Is Contributing to Both Roth & Traditional 401k A Good Idea?

Considering which type of 401k you should contribute? Read here to see an explanation of using both Roth and Traditional 401k. New article post Is Contributing to Both Roth & Traditional 401k A Good Idea? appeared first on We on Fire - Our FIRE...

There are a lot of arguments for contributing to both Roth and Traditional 401k. People opt-in for both equally because you can get the best of both world. The main argument is that you can save more tax contributing to both vs contributing to just one. Throughout this article, we will refer investing to both Roth & Traditional as R&T. For Roth or Traditional only, we will write ONLY Roth or ONlY Traditional. Let’s us take a closer look at the tax saving calculation for contributing to both Roth and Traditional 401k to figure whether or not it is the best of both worlds. All of the calculation for ONLY Roth or ONLY Traditional is done through our Roth 401k vs. Traditional 401k: Which Is Really Better article.

There are two different 401k you can contribute to:

  1. Roth 401k
  2. Traditional 401k
Roth 401k Vs Traditional 401k

The annual contribution limit in 2018 for 401k is $18,500. If we slipt the contribution in ½, then each type of 401k will get $9,250.

We will first look at the tax implication at the time of contribution and then the tax implication during retirement. Please note that this is a very simplified calculation assuming no changes to your $60,000/year income and tax rate over 30 years.

Income Tax for 60K in California

The screenshot above is contributing ½ our annual limit to traditional 401k. Your take-home pay is $40,005. However, you still need to contribute an additional $9,250 to Roth 401k.

So, your actual take home is $30,755.

Investment Earning of Roth and Traditional 401k

Extra Saving

Compound Interest Graph for Investment

For R&T contribution: $5,573 is the extra investment ((30,755-27,980) + 27,980*0.1).

The picture above is the compound interest of extra investment if you choose R&T 401k. The final balance after 30 years of investment is $752,472. By the way, we will use Roth IRA and HSA for our extra saving. This way it will not get tax when we withdraw money.

Investing Your HSA with Lively

Why You Should Use HSA As An Investment

Extra Investment Growth for Roth and Traditional 401k

Total Earn on R&T 401k

Each of your 401k (Roth & Traditional) will have $1,248,732. The total is $2,497,464.

Comparing to contributing to ONLY Traditional, R&T 401k yield $1,491 less ( 2,498,955-2,497,464)

The maximum income that you can earn without paying tax:

Filing Status: Single
  • Under 65, gross income threshold = $12,000
  • 65 or older, gross income threshold = $13,600

Tax On Withdrawal

We will withdraw $50,000 for the next 49 years (You will be around 109 years old!). People are living longer now. That’s why I choose 49 years and also 50k makes my calculation easier. =) . Since we have 2 accounts and only Traditional will be taxed, we will withdraw $12,000 per year from Traditional 401k and the remaining $38,000 from Roth 401k.

Our tax for Traditional withdrawal of 12K there is no tax because tax only starts to apply when you make more than 12k. Our tax from Roth withdrawal of 38K is also zero because we already paid the tax before. After 49 years of taking out 12k, you will have $660,732 left in your Traditional 401k (1,248,732-(12,000*49))

How much do you have to make to file taxes — What is the minimum income to file taxes?

If we withdraw $38,000 from Roth 401k it would only last 32 years (1,248,732/38000). To supplement the remaining 17 years, we will need to withdraw from our IRA or HSA account. In the end, you will have $106,472 left in your IRA/HSA account (752,472-(38000*17)).

Roth 401k Only

Roth 401k withdraw calculation is simple since there is no tax at all. A withdrawal rate of 50k/ year will last you 49 years. Did I mention that I picked 50k withdrawal to make my calculation easier?

Traditional 401k Only

For Traditional 401k, you need to withdraw an additional $9825 from your extra saving account to make up the difference in the tax you have to pay in order to get 50k annual income.

Money Leftover after 49 years

With some simple math calculation of subtracting the additional money needed from the additional account, we come up with the final amount leftover from our retirement account and extra saving account for each option:

Withdraw Table Roth vs Traditional vs R&T 401k
Withdraw Table Roth vs Traditional vs R&T 401k


Seems like you might be able to save more if you contribute to both Roth and Traditional 401k. You can take advantage of Traditional 401k to reduce income now and the advantage of withdrawing from your Roth 401k tax-free during retirement age. Your total tax is the least if you split 401k between Roth and Traditional. This is because of the last dollar concept.

New article post Is Contributing to Both Roth & Traditional 401k A Good Idea? appeared first on We on Fire - Our FIRE Journey.

Why You Should Start Saving for Retirement Now

The big three expense categories are house, care, and food. Without changing your lifestyle do you think you will have enough for retirement? New article post Why You Should Start Saving for Retirement Now appeared first on We on Fire - Our FIRE...

A lot of my friend’s plan is to have a car, a house, and start a family someday. They are willing to work a 9-5 corporation job until they are 65. Of course, there is nothing wrong with working at a company that you love and believe in. However, without living frugally and saving aggressively, do you think it’s possible to retire when you reach 65? Will you be able to save enough for retirement?

The most basic necessities that people want are a house, a car, and food. Along with other miscellaneous items such as planning for a kid, college, and health insurance, cost of living can quickly rack up. Below are average expenses that you will need to cover throughout different parts of your life. The purpose of this article is to show that even if you work a 9-5 job until you are 65, it will be very hard for you to retire without saving aggressively. I will go over the cost for the basic necessities starting with housing cost then transportation cost and finally food cost. I’m here to give you more reason to start saving now even if your goal is not to be financially free. Our examples will start at 30 years old.


Average home price in the Bay Area is one million dollar! Holy moly smoke, now that is a lot of money. With a 20% downpayment, you will need to come up with 200k cash. A monthly mortgage payment of 6% interest rate is $4,796. The true cost of owning a house will be $5,650 per month for 30 years. You can calculate the true cost of ownership by going to This includes items other than the monthly mortgage payment like property insurance, property tax, and maintenance.

Housing Expenses

After 30 years, you will need to continue to pay a property tax of $1,358/month. You need to pay for house maintenance of $70/month. The insurance cost is about $31/month. In total, it is $1459 per month after you completely paid off the mortgage.

Housing Monthly Expense


If you buy a new Honda Fit 2019, your 5 years cost will be $34,087. On average the cost of transportation is $6,000 a year after paying off the car.

A few months ago, I was planning to buy a new car because my car got overheated and started to make a weird noise even though I fixed the overheating problem. The result of my car research: I found Honda Fit to be a good car for a small family because it is affordable, reliable, and high mpg. If you drive a fancier car, the expense will increase.

Car Expense
True Cost Car Ownership


The average food budget for American is $6,602 per year, including eating out. That’s about $550 a month for 2.5 people according to valuepenguin. Depending on how often you cook a healthy meal vs. going out to a fancy restaurant, this number can change drastically. We cook at home a lot so our expense for food is only $2,400 a year.


Now, let add an additional member to the family! The estimated cost of raising a child from birth through age 17 is $233,610, according to the CBSNews. Reminder, this estimate is only for 1 kid.

the University of California cost is $35,300 a year. Hopefully, after 4 years of college, your child will be able to support him/herself.

University of California Expense


On average, the cost of health insurance is $1,168 per month in premiums for a family according to the ehealthinsurance. In the later years of your life, health insurance cost about 1k for two people who are 60+ years old. Therefore, there isn’t much change.

Soooooooo, without changing your existing expense, how much do you need?

Timeline of Expenses

Putting It All Together

Starting from 30-47, your family will need to make at least $108,972/year to afford the average lifestyle in California. To be able to save for retirement, you will definitely need to make more! If your household does not have high-income earners, then saving for retirement will be delayed.

For the 4 years that your child going to college, you will need an additional $2,000 every month. Your household will need $129,708/year during the years that your child is attending a university.

During your retirement years when you are 60 years old, you will still need around $43,000 a year. We came up with this number by adding the car, insurance, home, and food ONLY. A human life expectancy is getting longer every year. The possibility that you will live well to your 90s is high. In this case, you will need $1,290,000 for 30 years of retirement. Since you did not save during your prime years, how are you going to retire when you are older?

Retirement Saving

Using the compound interest calculator, we will need to save $10,550 a year for 30 years with an interest of 8% to reach our retirement fund.

Adding Tax

Annual Income Needed for Retirement

The table above is grouped by age. The second column is the annual income that you need when adding expenses and $10,550 a year for retirement. The last column is an estimate of 30% tax on our income.

Keep in mind that the example above is a very simple scenario. It does not include bear market, inflation or unfortunate events such as unemployment and health complications. Any of these life events can cause a major set back to your retirement plan. Nor did we factor in private school for your kids, higher education and buying new cars. Your car might not last you 60 years. What about vacations? Are you going to take any vacation trips? That will cost money.


Now, do you think you can still retire when you are 65 working 9-5 without saving? Now, do you have second thoughts on owning a new car, eating out at McDonald, or owning an expensive house? Is your household income going to be 155k or more? If not, then you better start saving those hard earned dollars now. This is why you should start learning how to save! Start saving while we are young, will help us greatly in the future.

Tackling the Biggest Spending Categories Part I – Housing

Tackling the Biggest Spending Categories Part II – Transportation

Tackling the Biggest Spending Categories Part III – Food

New article post Why You Should Start Saving for Retirement Now appeared first on We on Fire - Our FIRE Journey.

Our Financial Reflection – January 2019

January is the month of creating new changes. We learned how to improved our finance and stop eating out. Read how it turn out now! New article post Our Financial Reflection – January 2019 appeared first on We on Fire - Our FIRE Journey.

I can’t believe January is already over and it’s that time of the month again! Time for our monthly reflection where we give we reflect on everything, the goods and the bad that happened over the last month. We also provide an overview of our financial picture to see how we are doing on our FIRE journey. This is also to help us keep track of our progress.

The new year is a good time to implement new changes. We have made a lot of new goals and we are determined to achieve all of them. Let’s get busy!

How to Achieve Your New Year Goals

Cut out These 7 Highly Ineffective Habits in Your Life

8 Reason Why You Should Look at Your Finances Regularly

Things That Went Well

We only went out to eat 3 times total this month (Mr.WoF: 1 and Mrs.WoF: 2)! Eating out with co-workers every week has been cut down to zero. Instead of going out, we learned how to make Pho and Vietnamese Coconut Curry. YAY! We finally know how to cook better after 4 months of practices. We cooked a lot of chicken this month because the chicken was on sale for 79 cents a pound at Smart and Final. This kept our weekly grocery bill less than $50 for 2 people. The receipts below are legitly good Vietnamese food and easy to make. Our first attempt was so-so but we perfected the soup in our second attempt. If you don’t succeed, then try and try again. P.S following directions also helped.

How to make PHO GA (Vietnamese Chicken Noodle Soup)

Vietnamese Chicken Curry Recipe

Tackling the Biggest Spending Categories Part III – Food

Things That Went South

I sold my Facebook stock too early before the earning! It was actually a mistake on my part of putting a stop loss a little too high. I should have put in a trailing stop loss instead of a stop limit. I did not change my stop limit order and my Facebook stocks got sold even though I didn’ want to sell the stock. Facebook stock jumped 12% after their earnings call :(. Noooo, all that gains I could have had.

Note To Self: Use trailing stop lost for stock and NOT stop limi.

Going to the gym has been really hard for me lately. I bought a 2-years of 24 hours fitness membership from Costco and I still have one year remaining. Since I paid for it already, I might as well take full advantage of it before my membership expires. The problem is I have been so preoccupied with other things that I haven’t found a set time for the gym. I used to gym right after work since the gym was on my commute route.

I’ve moved since then and now going to the gym requires me to head home first. Once I’m home, I don’t feel like stepping out of the house anymore. I have been trying to wake up early and gym before work, though that has not been very successful due to cold/rainy weather. Maybe I will do better this month.

Investment Refection

Wow, the stock market bounced back big time from December low didn’t it? This is exactly why “Be greedy when people are fearful and be fearful when other people are greedy” – Warren Buffet. Except we didn’t have any more money to invest in December! What a shame. Well, I’m just glad that the market bounces back and hopefully, it keeps going up. Though, I’m afraid this is the January bounce is from all the big hedge funds loading up for the year.

We are continuously contributing to our 401k during the low of the stock market in December. Hopefully, we will see some growth in our retirement account soon.

Side Job Reflection

There is fierce competition on just helping other realtor hosting an open house on Saturday or Sunday. One realtor suggested doing a twilight open house instead of the regular hours. I took his advice and hosted an open house from 7-9 PM. Except, no one else cares to pop in to say hello. That night was cold and it was so dark that I can bearly see my open sign on the sidewalk. From this experience, I would definitely try twilight open house again in the summer only because of the sunset later than in the winter. Plus, people tend to walk around more when it is warmer.

For this season, I think I will try hosting an early bird open house from 9-12 AM on Saturday and Sunday instead. Maybe, there is less competition around this time.


Our credit card bill remains a little high this month due to two big expenses. One is from Mr.WoF changing all four tires on his car. He got BFGoodridge tires from Costco with 70 dollars off.  The total came out to be $525 which is a decent discount. The second big expense is we booked a cabin for a snow trip! There are more than 10 people coming so this will be a fun trip! Mr.WoF paid full price for the booking, but he will be getting most of it back when our friends pay us.

For the loan, we still have student debt and a loan that we took to buy stock. At this point most people would freak out why in the world would you take money out to buy stock! The simple reason is we can borrow a lot with low interest. We are using velocity banking to pay back the loan quickly and Navy Federal loan APR is 7.99% instead of the usual 20% APR for other credit cards. For student loan, we are only paying the bare minimum because the APR is only 3%.

Good news, for those of you who have Navy Fed credit card, there is a special for balance transfer APR of 1.99% for 12 months. I’m planning to use this offer in Feburary to reduce my interest rate =)

Investing in Real Estate by Using Velocity Banking

Navy Fed Balance Transfer Special Offer 1.99% APR For 12 Months (expire on Feb. 28, 2019)

Expense Table

Looking Forward

One new year passed and another one is coming again in a few days (Lunar New Year). We are looking forward to seeing if the stock market continues this upward trend. We are also reviewing different CRE. Hopefully, we can get acceptance for our LOI (letter of Intent) and invest in another CRE for passive income soon.


Since the stock market is green in January, our retirement accounts increased by 10.91% compared to last month. Overall our account has recovered 9.19% from horrible December performance. The stock market bounces back really helped. There is a huge change in the passive income category this month compare to last month due to stocks dividends mostly paid out in December.


New article post Our Financial Reflection – January 2019 appeared first on We on Fire - Our FIRE Journey.

22 Most Frugal and Romantic Dates Idea for Valentine Day

We usually spend a lot during the special holiday like Valentine. However, romantic dates do not need to break the bank. Read more for tips for frugal dates New article post 22 Most Frugal and Romantic Dates Idea for Valentine Day appeared first on We on Fire - Our FIRE...

Since both of us are on the path to FIRE, financial independence early retirement, our top priorities when we go out on our date nights are cheap but fun! We believe that enjoying each other company while checking out new scenery do not need to break anyone’s bank account. We hope you too can enjoy your SO’s company while spending less. I have compiled a list of cheap but fun activities we do together. Looking for fun activities that aren’t going to break your bank. Check out these activities below:

1. Movie Night

We can rent out movies from the library. You can also utilize your subscription video streaming websites.

If you want to hit the theater, check out the article on “7 Ways to Save on Movie Theater” to find out ways to buy 2 tickets for $5.

2. Live Comedy/Shows

There are great comedy shows all over the bay area. You can find live comedy for $5 on Groupon or TodayTix.

Your company might offers discount tickets to popular shows. If you don’t have the information, you should talk to your HR.

3. Go Hiking

If you and your partner are active or want some fresh air, there are many hiking places around the Bay Area. For the list of hiking places near you, visit All Trail website. You can also pack up some food and make it into a picnic.

4. Have a Picnic

A way to a man’s heart is through his stomach (P.S this also work to get a woman’s heart as well).  If you need help with picnic food idea, check out all recipes for a long list of ideas.

One of our favorite place for a picnic in the bay area is the Pulgas Water Temple. It is a really pretty and secluded place. During the weekend, the whole place is rented out for a wedding reception. The public can only use it during the weekday. Preferably during summer with warmer weather. Having a picnic in the cold isn’t fun.

You can Yelp pretty picnic place to get more location ideas.

5. Check out Fun Cheap

Fun Cheap is a website for Bay Area events. My co-workers and I scored a free drive-in movie because the theater was celebrating their anniversary. There are so many events that happen locally that you can enjoy for free or at a low cost.

6. Play Board Game

There are many adult board games to spice things up. For a list of adult board games check out Popular Mechanics. You can also include another couple to have a double date.

Tip: Monopoly might not be the best game to play as a couple. It is known to break family and relationship.

7. Bowling

This year (2019) Valentine day is on a Thursday. Many bowling places would have discounts on a weekday. Check out your local bowling alleys for coupons!

8. Mini Golf

There is also a deep discount on a weekday for mini golf as well. My local mini golf has a better discount for a group of 4 people. If you are planning to have a double date, check your local mini golf place for a group discount.

8. Arcade Games

If you are in the south bay area, there are a lot of arcade game places. You can find them at most mini golf places.

Our favorite arcade is Round One. There is unlimited gaming for 2 hours and cheap beer/wine that won’t break your wallet.

10. Free multiplayer online game

Want to spend nothing on games? A lot of free games are now online! There are free board games to multiplayer games.

11. Play Console Games

If you already own a console, you can check out the library for some free games! Free game rental at your local library.

12. Visit your local parks

There are many beautiful local parks. It is also a great place to have a picnic.
For the south bay, I would recommend the Japanese Friendship Garden in San Jose. The park is so beautiful that people would book the place to take their wedding pictures.

13. Check out the museums near you

You can get FREE museum passes from your local library!
There are some amazing displays at your local museum. You can show off your knowledge by reading up on the history before going to the museum or a self-guided tour.

14. Zoo

If animals are more of your forte, Your local library might have a free pass for the local zoo. For the Santa Clara Library, you can click here to learn more.

15. Go Volunteer in your community

Sharing your love with your community can help build a stronger relationship! My boyfriend and I always try to volunteer at least 1 time a month. We had walked around the park and pick up trash. While picking up garbage, we share scare stories about find sinner things in the brushes. Of course, you can share other more romantic stories as well. After all, it is Valentine day and not Halloween.

TIP: You can use the NOsleep Podcast if you can’t think of any scary story.

16. Camping

Talking to each other throughout the night while looking at the beautiful sky full of stars, is another way to be frugal yet romantic. There are many places to camp in the bay area for less than $40 a night. You can even hike deep into the wood to be more secluded.

One of my favorite place to camp is Sykes hot springs in Big Sur. You will need to hike 10 miles into the wood to enjoy a natural hot spring.

17. Paddle boat

When I’m on a paddle boat with my boyfriend, I always think of the scene in the Little Mermaid where the princess was in a boat with the prince. It is very peaceful and provides good excise! Once you are in the middle of the lake, you can just let the water drift you away.

TIP: Paddle boat in February in California might be cold, so be prepared and bring an extra coat.

18. Cook Together

Cooking together and having a romantic dinner with each other company will last forever in your memory. It will turn into an experience more than just a romantic dinner together.  

TIP: If you never cooked before in your life, you should consider easy recipes with 4-5 ingredients max.

19. Make a Coupons Book

Who doesn’t love a coupon book? This is one of my favorite gift to receive or to give. You can put a lot of personal touch on it and create a lot of quality time. Some ideas for a coupon book is free massage, home cook meal, a walk in a park, and chores free weekend.

20. Home Beer/Wine tasting

Alcohol is one of the most expensive items on the menu in a restaurant. One way to work around this is to drink at home =). You can find most alcohol for a better price at BevMo.

21. YouTube Karaoke

If you want to serenade your lover through karaoke, it is free on youtube! There are thousands of songs with the lyrics to help you win their heart. Yes, my boyfriend sang many love songs to me on our first anniversary. You can pick your songs ahead of time and start practicing before the big day.

22. Ballroom Dancing

My boyfriend and I don’t really know how to ballroom dance but we won’t let this stop us from having fun. We went to a park near our workplace, turn on youtube, and start dancing. Surprisingly, we were the only 2 people in the park. In the park, there is a dock next to a lake, we slow dance, and watch the sunset in each other arms.


Money cannot buy love. Therefore, you do not need to break your bank to make your partner feels special. We should treat our partner with love and appreciation every day.

New article post 22 Most Frugal and Romantic Dates Idea for Valentine Day appeared first on We on Fire - Our FIRE Journey.

How to Get a 45% Raise in One Year

I got a 45% raise after one year with my company. How did get such a big increase? Read on to see what I did and how you can get that big raise yourself! New article post How to Get a 45% Raise in One Year appeared first on We on Fire - Our FIRE...

My first job out of college was a Technical Support position. I started out as an intern for six months before becoming permanent. My starting wage was 55k which at the time I thought was ok since I’m fresh out of college with no experience. Never did I imagine that my salary would quickly increase to 80k annually. This equates to a 45% raise! In one year! How was I able to get such as big raise in such a short amount of time? The answer lies in the playing your cards at the right time.

As a Tech Support, I help troubleshoot customer issues with our application. Instead of hardware, I was fixing software issues. My thinking was that I would work for a year to get the experiences and move on to a better paying job. I definitely did not want to be stuck in support forever. My career aspiration was to either be a software engineer or a web developer.

Show that you’re valuable

The first thing you want to do to get a raise is to work hard and become a top performer. Only by working hard can you then give yourself a better chance to get that raise, that promotion or bonuses. If you don’t show your boss that you work hard, work smart, and a team player then there is no way you will get a good raise.

I trained for 2 weeks and was on the phone with customers immediately when I first started. I showed my manager that I’m a quick learner and is able to pick things up quickly. You need to be able to put in the hours to learn the rope. I’m more of a hands-on person; I learn by actually doing tasks. So in order for me to learn more, I actually have to work more. I pick up all the cases that come in the queue, even the ones that I have no idea what they are talking about. If you want that raise then show your boss that you work hard and willing to go the extra mile to get the job done right.

At times, I would leave late due to an urgent escalation call coming in. I attended late-night meetings with the team in India. Went through records of old issues and review documentation for information and hints to resolve newly reported problems. I asked a senior member in my cube 20 questions a day. I think he got annoyed of me after a while cause he started ignoring me. By asking questions you will gain more information and details on how to do your job better.  You need to be eager and hungry for knowledge!

knowledge is power
More knowledge mean more leverage

I ate lunch at 2 pm while my coworker ate lunch at noon. Someone needs to handle the phone during lunch and I bravely took the task. I was willing to pick up any urgent escalation that my manager assigned to me. You want to be able to help your manager in any ways you can. Show that you can take tasks off of his hand to lessen his workload. You slowly win your way to the top performer in your team or even in the whole department. Making you an irreplaceable employee. Only then will you give yourself a chance for that big raise.

Finding New Opportunity

After a year of hard work. I was able to learn everything on the job. It is time to play your first card. After you learn everything and start to feel like there isn’t much you can learn from your current job then is it time to move on. This is when you start paying more attention to office politics and company financials. You want to gauge if your company is doing well. Because if your company is not doing well then there not much you can do even if you are a top performer. In which case, you should consider looking for a better higher paying job anyway.

You also want to see who are the decision maker in your company. Your manager might just be another worker bee. You need to befriend those who have power, such as your director or executives. My manager helped push for my raise but it was my director who gave the go-ahead instantly. If the time is right, then you should start looking for a new job or at least be open to the opportunity.

As for me, my opportunity came knocking when my old boss from my part-time job in college contacted me regarding a permanent position. Even though I might have to move back to my college town I knew it was a good opportunity regardless. So I drove 2 hours for my interview. The interview went well and my old boss gave me an offer with a starting salary of 65k!  Oh boy, a 10k increase from my current salary; I was ecstatic! When you do get an official offer, DO NOT SIGN or Submit the offer yet. Because you still have another card to play.

The Counteroffer

Right after I received the offer I went to give my manager with my 2 weeks notice. What happened next was beyond my expectation. Instead of letting me go, he gave me a counteroffer of 75k annual salary for me to stay. He then went to get approval from my director, who also agreed. I was so shocked that I agree to it right away. Later that day I meet with my director and found that they are starting a new role in the team would like me to take the lead on the projects. After a quick discussion, I was interested and was even able to get a final counteroffer of 80k! This was how I got a 45% raise in one year.

The counteroffer is the final card you can play. Always ask the company what they can offer you for you to stay with them. More often time then not, if you are a top performer, they want you to stay and will give you a counteroffer. You have nothing to lose and everything to gain.


The takeaway here is that you never know what can happen in the future. What you do know is that you can always give yourself an opportunity. Put yourself out there so that when an opportunity comes you’re ready to take it. You can say that I got lucky and I timed it right but, I think luck is also a skill. If you’re not putting yourself out there then you will never be lucky. You need to put yourself in a position to be lucky. Always aim to be a top performance in whatever that you do. Doing so will always give yourself a chance for that big raise when coming due.   

Luck is a matter of preparation meeting opportunity

Oprah Winfrey

New article post How to Get a 45% Raise in One Year appeared first on We on Fire - Our FIRE Journey.

Roth 401k vs. Traditional 401k: Which Is Really Better?

The most popular options for retirement investing are Roth and Traditional 401k. Each with different benefits but which one is better? New article post Roth 401k vs. Traditional 401k: Which Is Really Better? appeared first on We on Fire - Our FIRE...

401k is a retirement investment account which you and your company can contribute to. There are 2 different types of 401k account: Roth and Traditional 401k – each gives you different benefits. First of all, there is a high chance your company will match up to a certain percentage of your contribution. This means FREE MONEY! Second, there are tax benefits. Third, the investment is sheltered from creditors.

As an example, my company matches 50% of 6% up to 6% of my annual salary. For instance, my company would contribute $1,800 when I contribute $3,200 in my 401k if my annual salary is $60,000. For the actual amount, you should discuss your company 401k policy with your HR department.

There are two different 401k you can contribute to:

  1. Roth 401k
  2. Traditional 401k
Benefit Comparison of Roth VS Traditional 401k

The maximum contribution for 2019 is $19,000. If you are age 50 or over, the catch-up contribution is additional $6,000 in 2019. Which 401k should you contribute to?

In this article, we will attempt to compare the two 401k account to see which is better for you. First, we will first look at the tax implication at the time of contribution. Second, we will calculate extra investment opportunity for each of the 401k plans. Lastly, we will calculate the tax implication on withdrawal.

Please note that this is a very simplified calculation assuming no changes to income and tax rate over the next 30 years.

Tax Return on Roth 401k

Roth 401k

The screenshot above is the tax in California (yes, it’s a very expensive place to live). Assuming an annual salary of $60,000 and we are single, the total tax a year is $13,520 with an effective tax rate of 22.53%.

If we choose to contribute to Roth 401k, then it is after-tax contributions. Therefore, we have to subtract 18,500 to get the final take-home after contributing to Roth 401k is $27,980. Eventhough, that is not much but is enough to live on. In fact, I only spend ~20,000 annually while renting in California. Total tax for 30 years is $405,600. Now, let’s look at our tax bill if we choose traditional 401k instead.

Tax Return on Traditional 401k

Traditional 401k

Here, we are contributing the max limit to traditional 401k. In 2018, the limit is $18,500. Our take-home pay is now $32,464. We are still using CA as our state and we are single. Our tax bill comes out to be $9,036 with an effective tax rate of 15.06%. Total tax for 30 years is $271,080.

Compare income tax on Roth vs Traditional:
$405,600- $271,080 = $134,520.

You are paying $134,520 extra tax when choosing Roth.
WOW, that’s a lot of money.

With Traditional 401k, we can invest more of our take home money. Hence, in the table below, in the extra saving (10%) row, you will see an extra $4,484 added on for traditional 401k.

Summary of the Calculation for Investing in Roth and Traditional 401k

Roth 401k strongest point is the withdrawal. Let’s us take a closer look at this benefit.

Roth Extra Investment

First, let’s assume our luck is terrible so we never receive a raise. Therefore, our income always stays at $60,000 (This make the math easier to explain). We are also going to invest 10% of our income outside of 401k like good FIRE people. The annual return for all of our investment is 8%. We can take money from our 401k when we are 59 ½ years old. If we start investing when we 29 years old we will be investing for 30 years.

We will invest this money into Roth IRA because of its’ tax-free benefit. We already got tax on our take home money, so we don’t want to get tax again on our gain =) (also make it easier to explain hehe)

Roth 401k: $2,789 is the extra investment (27980 * 0.1)

Compound Interest on Extra Investment – Roth 401k

The picture above is the compound interest on extra investment if you choose Roth IRA. The final balance after 30 years of investment is $376,263.

Traditional Extra Investment

Traditional 401k: $7,282 is the extra investment ((32,464-27,980) + 27,980*0.1).

Compound Interest on Extra Investment – Traditional 401k

The picture above is the compound interest of extra investment if you choose Traditional 401k. The final balance after 30 years of investment is $982,792.

NOTE: Roth IRA contribution limit for 2019 is $5,500.

Since traditional 401k gives you 7K extra to invest, you will be over the limit of Roth IRA. However, never fear, HSA is here!

TIP: HSA can use an investment vehicle. It is triple tax-free! No Tax coming in, no tax coming out, and no tax on growth. Read more about investing with your HSA below.

Brokerage Account Beginners Guide

Why You Should Use HSA As An Investment

Investing Your HSA with Lively

The difference between Traditional and Roth:
982,792-376,263 = $606,529

Meaning, you will have an extra $606,529 from your 10% saving if you choose Traditional 401k.

Extra Investment You can Gain from Roth VS Traditional 401k

Moving on, now, let’s compare our tax bill when we withdraw from Roth vs Traditional 401k.

Compound Interest of 401k

Roth Tax

The picture above is a compound interest on our investment in our 401k over 30 years with 8% increase per year. The growth of Roth and Traditional 401k is the same that’s why there is only 1 compound interest graph.

Well, Roth 401k is easier to calculate. Since there is NO TAX on contribution and gain, you can take out everything on the graphs above without paying any fee only when you reached 59 ½ years old. Would this rule change in the future? We don’t know but for simplicity, we are hoping that the rule will remain. The final balance of $2,498,955 is all tax-free!

Remember, the employer match is still subject to tax. We are not counting employer match in our calculation. The maximum contribution does not take consider of employee match. We are withdrawing when we reach 59 ½. We are not calculating for early withdrawal.

Employer Match = Taxable when withdrawing
Your Contribution = No Tax when withdrawing
Growth =  No Tax when withdrawing

Traditional Tax

Now, for the Traditional 401k withdrawal calculation. By the end of 30 years of working hard and contributing to our 401k, we will have $2,498,955! We will withdraw $50,000 for the next 49 years (You will be around 109 years old!). People are living longer now. That’s why I choose 49 years. (also for easier calculation of 50k =)

Tax on Withdraw for Traditional 401k

Assuming no change to the tax rate, you will get tax $9,825 a year. In total for 49 years with Traditional 401k, the tax on withdrawing will be $481,425.

If you need 50k a year in your retirement year, you will need to take out an additional $9,825 with traditional 401k because of tax. This money will come out of your Roth IRA or HSA which is tax-free.

The difference between Roth and Traditional Tax:
$0 – $481,425= -481,425

Withdrawal of Roth VS Traditional 410k


Generally speaking, in real life situations, it will be much more complicated than this. There are many factors that we didn’t take in consideration and is beyond the scope of this article. For example, moving to a cheaper state like Texas which has zero state tax. This way we don’t have to pay a ridiculous high California tax. You will need to determine which scenarios best fit your situation.

In short, for the scenario that we calculated, it is best to contribute to traditional 401k because you will have 500k extra.

New article post Roth 401k vs. Traditional 401k: Which Is Really Better? appeared first on We on Fire - Our FIRE Journey.

Link to Category: Finance Blogs

Or if you prefer use one of our linkware images? Click here

Social Bookmarks

Available Upgrade

If you are the owner of We on Fire, or someone who enjoys this blog why not upgrade it to a Featured Listing or Permanent Listing?

Use Weebly? Than submit your blog for free to our blog directory.