My wife and I are expecting our first born to arrive in about a week!! We've been fairly frugal, and I believe have saved a nice little bit for retirement relative to our income. My wife is a Middle School Teacher, and I'm in Sales. Total Gross income for 2013 will be $85,000 not including a $9,000 bonus I have coming in a month.
With the kid coming, and all of the changes that will bring, we aren't real sure on what to prepare for in terms of additional costs. Daycare is going to be an expensive reality for us in about 3 months. We are looking around $700/ month (which I hear is a low price nationally) for daycare. So that will eat up a nice chunk into our saving ability.
I've been feeling our portfolio could us a tune up. So I open up our financial lives to the experts on the this forum. Give me the good, the bad, and the ugly.
Emergency funds: $19,000 (broken up between a Money Market and extra cash cushion in our bank account). Equals a little over 6 months expense. Going to push to get a years worth within one – two years.
New SUV For Wife: $17,000 & 1.45%. Monthly payment $300, 4.5 years left
Probably my biggest financial blunder so far. Should have bought a slightly used vehicle. But my “wing man” (wife) didn't help much in the saying no department. We will keep this thing for a minimum of 15 years. Debating on whether it's worth it to just pay it off with the taxable fund to free up monthly cash flow (and thus throw that into the 401k).
Mortgage: $127,000 30 year @ 4.875%. Been considering contacting Pen Fed to get a lower rate. The only wrinkle is I don't know how long we plan in staying in this house to make the re-financing worth it. We may try for # 2 kiddo in a few years, and our current home would be a little tight at that point. I'd consider dipping into the EF to refinance.
Tax Filing Status: Married, Filing Jointly. Will have a new dependent in about a week!!
Tax Rate: 25% Federal, 7% State
State of Residence: NC
Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 15% of stocks
Portfolio Size: $144,000 (EF not included)
Current retirement assets
100% American Century Moderate Fund (ACOAX) ER 1.06%
I realize this fund is expensive and not tax efficient. However, this is my wife's trust money left over from her Grandfather's estate. My father in law picked the fund and as such there is some family politics involved with this cash. I want to get it moved to a lower cost, tax efficient fund. Any suggestions?
His 401k - $56,000
19% Black Rock US Debt Index – ER .36%
46% Black Rock Equity Index-C – ER .03%
21% Blackrock Extended Equity Market-K -ER .11%
15% Blackrock ACWI ex- US Index -ER .11%
Company match- 100% Match on 3%, 50% match on additional percentage up to 5%
His Roth IRA at Vanguard- $30,000 (max every year)
14% VANGUARD Emerging Markets Stock Index (VEIEX) ER .33%
20% VANGUARD Mid Cap Growth Index (VMGIX) ER .24%
16% VANGUARD Small Cap Growth Index (VISGX) ER .24%
19% VANGUARD Total Bond Market (VBMFX) ER .22%
31% VANGUARD Total Stock Market Index Fund (VTSMX) ER .18%
Her Roth IRA @ Vanguard- $10,441 (max ever year)
100% VANGUARD Retirement Fund 2055 (VFFVX)- ER .18%
Her NC Teacher Retirement Program
Don't have a lot of info this, but they take around 6% of her salary every month. IF she stays in the system for 30 years, the annual benefit she will receive 1.82% of her final compensation X total years of service. Frankly, I don't even include this potential money into our plans.
New annual Contributions-25% of Annual Income to Retirement and 19% into cash
$8,000 HIS 401K (was $14,000, but with baby coming, I pulled back a bit to see how our budget will be effected). I realize this is a priority to get it maxed out.
$5,500 HIS ROTH IRA
$5,500 HER ROTH IRA
Funds available in his 401(k)
Invesco Stable Value (?????)- ER .36%
Black Rock US Debt Index (????)– ER .07%
PIMCO Total Return-Inst (PTTRX) – ER .46%
VANGUARD Retirement Fund 2015 (VTXVX) -ER .16
VANGUARD Retirement Fund 2025 (VTTVX)- ER.17%
VANGUARD Retirement Fund 2035 (VTTHX)-ER .18%
VANGUARD Retirement Fund 2045 (VTIVX)-ER .18%
VANGUARD Retirement Fund 2055 (VFFVX)- ER .18%
Eston Vance Large Cape Value-V (EILVX) -ER .60
Black Rock Equity Index-C (CIECX)– ER .03%
American Century US Large Cap Growth Equity Trust (????) -ER .58%
Blackrock Extended Equity Market-K (????) -ER .11%
Blackrock ACWI ex- US Index (BDOAX) -ER .11%
Dodge & Cox International Stock (DODFX)- ER .64%
Thornburg International Study (????) -ER .60%
Company Stock (NWL) -ER .00
1. Should I pay off the car loan right away? We have lived debt free for years, but the wife wanted a new car to replace the extremely tired car we had before. My current employer provides a company car and free fuel for my use, so we won't be needing another car for sometime, unless the worst case scenario happens.
2. Should we refinance the mortgage? I expect to be in this house for 5 more years.
3. What to do with the taxable account? It was a trust provided to my wife from her now deceased Grandfather. It's meant to spent on her continued education to get her master's. Which is not something she really wants to be honest. Her father talked to her into an expensive “moderate” account with American Century. It's a touchy subject because the money has “memories” for her. Strange, I know, but I do believe she'd be willing to transfer it to a lower cost tax advantaged fund if I walked her through it.
4. I'm frustrated that we haven't been able to max out my 401k yet. It would be an extreme stretch for the monthly budget (items pop up) for us to attempt to max out the 401k on a monthly basis. Any suggestions on how i can fully fund the 401k? Maybe transfer cash from the taxable account to the Roth's, instead of funding them monthly?
Thanks for your assistance!