Sam Clemens wrote: Mon Oct 27, 2025 9:50 pm
Is there any more info about what is considered “annual savings” under KlangFool’s formula? It sounds like any potential large expense beyond basic living expenses?
Typically, that’s retirement savings (401k & IRA contributions)1 and higher education savings (529 contributions), while other mid/short-term “savings” for lumpy expenses (home repair/upgrade, new cars, non-monthly bills) is probably a line item in your budget and is counted as “expenses.” It’s not hard and fast, as long as you count everything under Taxes, Savings, or Expenses (e.g., if you count the known monthly allotment for lumpy expenses under Savings vs Expenses it doesn’t matter as long as it was counted under one or the other). Contributions to a HSA might be considered savings if medical expenses are paid out of Taxable and the HSA is just treated similar to a Roth IRA (will only be used after age 65 for retirement expenses, not just medical).
Keep it simple: I have a detailed budget, but when I use Klang’s formula I ignore that spreadsheet since Klang’s formula is just three terms and simple subtraction. Even though I have line items for lumpy expenses in my budget there’s no specific line for WA sales tax (a whopping 9%, in exchange for no income tax). That’s accounted for under Klang’s expense formula even though I don’t have an explicit line in my budget for that (I do for property taxes, but not for all the other stuff I buy).
Sam Clemens wrote: Mon Oct 27, 2025 9:50 pm
I guess I misunderstood the Interm. Term Tax Exempt Bond Fund (VWIUX). I thought that was a viable choice in a taxable account given its federal tax-free status. But it sounds like it’s not a good choice for my situation. I have a slight loss in VWIUX so selling it wouldn’t be a tax hit.
It is a viable choice in Taxable, it’s just not optimal unless you’re out of space to hold bonds/cash in Trad Tax-Deferred accounts. Consider BND (nominal) and VTEB (tax-exempt).
BND has a 30d SEC yield of 4.08% and would be held in Trad Tax-Deferred, so you only pay taxes when you withdraw from this fund.
VTEB has a 30d SEC yield 3.48% but is still subject to CT state tax, so after-tax yield is 3.48% x (1 – 6.2%) = 3.26%.
4.08% is better than 3.26%, so that’s why holding nominal in Tax-Deferred is preferred until you’re Trad accounts are 100% bonds, yet you still need more to hold more, so at that point you put tax-exempt bonds in Taxable. To be fair, that 4.08% will be fully taxed at Fed + State on withdrawal, but only when you need those funds (and lots of folks plan to do Roth conversions in early retirement by tapping Taxable first, then Tax-Deferred, so the Fed & State rate may be significantly lower than the rate at which you deferred during accumulation). A tax-exempt bond in a Taxable account, esp. while you’re still in the accumulation phase, is incurring CT taxable income every month, whether you spend those coupon payments or not.
So it’s not “wrong” to hold VWUIX in Taxable, but since you have room for nominal bonds in your 401k (e.g., the Stable Value fund), that’s probably a more optimal setup to help minimize life-time taxes paid. This is down-in-the-weeds tax optimization, so if it doesn’t make sense for your plan (perhaps no Roth conversions and your tax bracket will never drop in retirement compared to working-years) or you just are happy with your setup, that’s fine. There’s lots of ways to optimize and at some point the “effort of the squeeze is not worth the value of the juice” because of diminishing returns on each successive optimization taken.
Money is a means to the lifestyle you want/need… one must always be careful to not get “stuck in the weeds” and focus on living that good life rather than micro-optimizing one’s portfolio!
Sam Clemens wrote: Mon Oct 27, 2025 9:50 pm
BTW- How do you post larger images on this board, like you did? Every time I post an image it appears much smaller. (Thanks again.)
That might have to do with your 3rd party image-hosting site. I use https://imgur.com while you’re using https://postimg.cc (which maybe is shrinking uploaded images to a specific size?).
It might also be the way your referencing your image… Imgur allows a “link” to the hosting site (https://imgur.com/EPiXSSq) and then also your can right-click the image and get a direct link to the PNG image filename (https://i.imgur.com/EPiXSSq.png). I always put the direct link to the PNG filename in between the [ img ] tags on this forum when posting images (yet clicking either link “seems” the same, but they’re not).
Just ideas, since I’ve never used postimg.cc, so not sure if it’s a site thing, a reference-to-file thing, or something else entirely.
