Emergency funds: 3-4 months of expenses
- His student loans: $firstname.lastname@example.org%, $email@example.com%, $firstname.lastname@example.org%
- Mortgage (former residence, now rental): $email@example.com% fixed
- Car Loan: $7.4k @ 4.95%
- Her student loans: $firstname.lastname@example.org%
Tax Rate: 28% Federal, 9.3% State
State of Residence: CA
Age: Both 31
Desired Asset allocation: 70% stocks / 30% bonds
Desired International allocation: 20% of stocks
Current retirement assets
6% DTE Energy (DTE)
2% Occidental Petroleum (OXY)
(Gifts to us from her family that are non-negotiable. I include here as it impacts how I distribute my other funds, but these investments will remain where they are for the foreseeable future.)
His 401(k) at Fidelity
9% Spartan® 500 Index Fund (FUSEX) (0.10%) Company 50% match up to 6% of income
His ESOP at Fidelity
11% Spartan® 500 Index Fund (FUSEX) (0.10%)
Her 401(a) (UC DCP) at Fidelity
4% Spartan® Total Market Index Fund (FSKTX) (0.07%)
His Rollover IRA at Vanguard
12% Vanguard Total International Stock Index Fund Admiral (VTIAX) (0.18%)
26% Vanguard Total Stock Market Index Fund Admiral (VTSAX) (0.06%)
His Roth IRA at Vanguard
14% Vanguard Intermediate-Term Bond Index Fund Admiral (VBILX) (0.11%)
Her Roth IRA at Vanguard
10% Vanguard Intermediate-Term Bond Index Fund Admiral (VBILX) (0.11%)
6% Vanguard Total Stock Market Index Fund Admiral (VTSAX) (0.06%)
$10k His 401(k) (including match)
$5.5k His Roth IRA
$5.5k Her Roth IRA
$7k Her 401(a)
Other Funds available in his 401(k) and ESOP
Vanguard Target Retirement funds (0.16-0.18% exp ratio)
Fidelity® Strategic Income Fund (FSICX, 0.70%)
PIMCO Total Return Fund (PTRAX, 0.71%)
Multiple managed mutual funds with exp ratios >1%
Other Funds available in her 401(a)
183 options available (Investment option list: http://map.ais.ucla.edu/go/1002217)
My strategy has been to fund my 401(k) up to employer match, max out both of our Roth IRA contributions, and then pay down the principle of the student loan with the highest interest rate as aggressively as possible.
I’ve set 100% of my 401(k) and ESOP contributions to FUSEX because it is the only fund available to me with a competitive expense ratio. I use the funds available in the other accounts to achieve my desired mix while minimizing expense as much as possible.
Important life changes/events:
- We moved from NC to CA in mid-2011 and were not able to sell our home in NC. We converted the property to a rental and it has been occupied the entire time since we moved. We currently have a net loss of ~$220/month (Rent Income-Mgt Fees-Mortgage-Insurance-Taxes-HOA).
- We are expecting our first child, due in September this year.
- My employer was purchased by a larger company and I will be receiving a lump sum retention bonus worth about an additional year’s salary late this year. I have been offered a job with the acquiring company, so I will be employed with a slightly higher salary moving forward.
- My wife is a physician and will be completing her MFM fellowship in July 2014. She will become an attending physician at an academic medical center and will have a substantial salary increase.
1. General question: do you agree with my general strategy, or should I consider different priorities/investment choices?
2. What should I do with our rental property? Our current tenant has a lease that expires in August. I am tempted to hold on to it for another year or two in hopes of selling in a better market, but might consider putting it on the market this summer so we can sell it after the current lease expires.
3. I plan to use the severance/retention lump sum payment to pay off my student loans. I am not going to touch her student loans because the interest rate is so low, I don’t think it makes sense to those off early. Should I consider a different use for that money? Also, what action, if any, should I take to address any tax concerns from this one-off additional income?
4. Are there any special considerations or changes I need to make to prepare for the change in my wife’s employment situation and our growing family ?
Sorry for the verbose post and thanks in advance for your advice!