Per Diem Pay Again - Actual Example From Michael's 2021 Pay/Taxes

I am not a financial advisor and don't want to pretend to be one (but I did consider it as a profession at one time) but I will share some background on my experience. My wife and I had the great fortune (pun intended) of nearly being broke after our honeymoon. We had about $100 left between the two of us but did have two cars that were paid for. I am going go share "the rest of the story" as I think this is instrumental to our success and may help others starting out or starting over. After a few months we had recovered and had maybe $2,000 and a few months later we had even more. We were a bit surprised that we were gain so much and discussed it and decided to set some goals. For the next month we kept a log of every penny we spent. We then set out an annual budget of what we should be able to save, allowing for insurance premiums, car license fees, an annual vacation, etc. For the next 10 years or so we kept a semi-monthly log (we had salaried jobs that paid us semi-monthly) of how we were doing compared to our budget. Some semi-monthly periods we saved less and some periods we saved more and we looked to se why. If we bought a TV, we decided that was okay since it was something we had thought long and hard about and decided it was worth the cost. This helped form our spending habits for the years ahead. I believe this is something that everyone would benefit from. Our financial advisor has been telling us we need to spend more and enjoy our savings and we've found that even good habits are hard to break.

My dad died almost two years ago at age 95. With some of our successes he would often ask me "what are you going to do with all of that money" and I would sometimes joke and say "go get drunk" but usually say "save it" and that would always bring a smile to his face and he would say "Good!". We can reward ourselves by saving for our future more than buying everyday crap we don't need.

Thanks for the Info. Me being 4 years ish from retirement and having been a previously high earner, it isn't likely to impact much on SS. I may rethink per diem.

Agree with your general advice to invest as much as you can. I did it early on. Makes for a brighter outlook later in life

I am actually considering advising Michael to reduce his 401k contributions and increasing his non-qualified savings/investments.

Most companies allow you to make Roth contributions to your 401K, so you invest with after-tax income, but then the withdrawals in retirement aren't taxed. If you are currently in a low marginal tax bracket and expect to be in a higher bracket when you retire, and/or can afford to pay taxes on money you won't see for years, this may be a good option. If your company does a 401K match, the match will be in a conventional (taxable upon withdrawal) account, regardless of whether your employee contributions are traditional or Roth. In that case you'll be building up both tax-deferred and non-taxable retirement money.

That is worth looking into for many employees. Michael is already contributing $500/month to his Roth IRA outside of his employer and that reaches the $6,000 maximum annual contribution limit for his age. He has a rollover IRA from his former 401k from C.E. England and he may do a Roth conversion of that account.

I am actually considering advising Michael to reduce his 401k contributions and increasing his non-qualified savings/investments.

Most companies allow you to make Roth contributions to your 401K, so you invest with after-tax income, but then the withdrawals in retirement aren't taxed. If you are currently in a low marginal tax bracket and expect to be in a higher bracket when you retire, and/or can afford to pay taxes on money you won't see for years, this may be a good option. If your company does a 401K match, the match will be in a conventional (taxable upon withdrawal) account, regardless of whether your employee contributions are traditional or Roth. In that case you'll be building up both tax-deferred and non-taxable retirement money.