Newly Married and Hoping to Start on the Right Foot

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
EngineerAndNurse
Posts: 5
Joined: Wed Aug 15, 2018 11:02 am

Newly Married and Hoping to Start on the Right Foot

Post by EngineerAndNurse » Wed Aug 15, 2018 2:36 pm

Hello Bogleheads!

Been reading the books and the forums for years and been doing my best to follow the general advice I’ve read. However, I recently got married and my wife and I purchased a condo so it feels like a good time to let some other people check my work and let me know where I can make improvements. All advice is welcome as I know I have lots to learn. Thank you in advance! I'll give any more info needed, I'm just not sure where to start. We’re both 27 years old. I work as an engineer. She works as a nurse.


Salaries
$166,000
Hers: $85,000
His: $81,000
Living in CA, I think we’ll pay in the neighborhood of $35-40,000 in taxes


Liquid cash
$20k between checkings and savings accounts


Brokerage (emergency-ish fund)
$32,250 and contributing $500 monthly


IRAs
$39,000. Both maxing out at $5,500/year


Sharp$aver (I believe it’s similar to a 401a) and TSP
Her 401a: $41,500 - Contribute 6% ($5,000) to Roth annually and employer contributes additional 4.5% traditional (max contribution allowed)
His TSP: $46,500 - Contribute 10% ($8,100) to Roth annually and employer contributes additional 4% traditional

Cars
2003 Acura CL and 2007 Nissan Murano both fully paid off


Loans
Her student loan: $7400
  • $1800 @ 6.5% - Paying $200/month ($100 over minimum)
  • $5600 @ 3.1% - Paying $100/month (the minimum)
His student loan: $24,250 @ 0%
  • Family member loan. Paying $250/month

Mortgage
Bought a condo at $450,000. Put $100,000k down. Interest is 4.5%. Between utilities, insurance, HOA, and mortgage, we pay $33,500 per year on the property


Other
10% to charity ($16,500/year)
Additional $4,000/year in non-negotiable spending (insurance, internet, phone, etc…)

Flyer24
Posts: 211
Joined: Sun Apr 08, 2018 4:21 pm

Re: Newly Married and Hoping to Start on the Right Foot

Post by Flyer24 » Wed Aug 15, 2018 2:57 pm

You are doing very good. I would stop the brokerage contribution and put it towards her student loan. Knock it out. Generally, you want to max out tax advantaged accounts before contributing to taxable.

runner540
Posts: 720
Joined: Sun Feb 26, 2017 5:43 pm

Re: Newly Married and Hoping to Start on the Right Foot

Post by runner540 » Wed Aug 15, 2018 3:13 pm

Congrats on the marriage, and a home purchase with solid down payment. Nice to see fellow Boglehead that prioritizes giving.

You should think about whether it's fair to the relative that is loaning you $24k at 0%, so you can put $500 into taxable. I would focus on paying off all the debts before any taxable saving.

Also, do a detailed estimate now of 2018 taxes and adjust your withholding as needed, to avoid any nasty surprises when filing.

Texanbybirth
Posts: 903
Joined: Tue Apr 14, 2015 12:07 pm

Re: Newly Married and Hoping to Start on the Right Foot

Post by Texanbybirth » Wed Aug 15, 2018 3:16 pm

runner540 wrote:
Wed Aug 15, 2018 3:13 pm
Congrats on the marriage, and a home purchase with solid down payment. Nice to see fellow Boglehead that prioritizes giving.

You should think about whether it's fair to the relative that is loaning you $24k at 0%, so you can put $500 into taxable. I would focus on paying off all the debts before any taxable saving.

Also, do a detailed estimate now of 2018 taxes and adjust your withholding as needed, to avoid any nasty surprises when filing.
Agree on all fronts. :beer

User avatar
Meg77
Posts: 2372
Joined: Fri May 22, 2009 1:09 pm
Location: Dallas, TX
Contact:

Re: Newly Married and Hoping to Start on the Right Foot

Post by Meg77 » Wed Aug 15, 2018 3:35 pm

Congrats!

I don't know who came into the marriage with all the cash or what the extended family relationships are like, but looking at everything from the outside, here is what I'd do:

1. Pay off her student loans today from cash. You have plenty of liquidity, and your cash flow will improve by $300 a month.
2. Sell $20K of the brokerage account to pay off the family student loan (with the rest coming from cash).
3. Redirect the payments from all the above plus the $500 a month going into brokerage to build cash back up to $20k.
4. Then boost retirement contributions to 20% of income with any excess savings boosting cash further or going to brokerage.

Re #2 - Equity valuations are very high so now isn't a bad time to sell, for one thing. Borrowing from a family member to invest in the stock market (which is effectively what you're doing) isn't a great idea anyway. I have some intra-family loans and am not against them, but in this case I think paying it off is worth it to have a clean slate going into the marriage. My husband and I felt most connected and on the same financial page once we paid off my car loan and his student loan that we'd each come into the marriage with - even though we both had similar incomes and were saving a ton and had bought a house, similar to you guys. It was surprisingly a relief to get rid of those nagging debts from our single lives though. Plus it can be awkward for your spouse to deal with a debt to your family member. Not to mention it can be annoying for said family member to see you guys spend money on stuff, and they may unconsciously blame your spouse.

If you can't stomach doing this for whatever reason, at least increase your payments so this is paid off sooner than 10 years. You can use the $300 a month from paying off her loans plus the $500 going into brokerage to boost your payments to $1000 a month and knock this out in just a couple of years.

Then boost retirement contributions and pile up cash and start 529 plans if life leads you that way and enjoy the ride! :beer
"An investment in knowledge pays the best interest." - Benjamin Franklin

Flyer24
Posts: 211
Joined: Sun Apr 08, 2018 4:21 pm

Re: Newly Married and Hoping to Start on the Right Foot

Post by Flyer24 » Wed Aug 15, 2018 4:40 pm

I also agree with paying back the family loan as quick as possible. They are already doing you a favor by not charging interest. You should pay them back before doing your own investing. The family members are losing out every month by not having that money invested for themselves. Treat it like any other loan that has high interest.

User avatar
akblizzard
Posts: 141
Joined: Mon May 05, 2014 4:25 pm

Re: Newly Married and Hoping to Start on the Right Foot

Post by akblizzard » Wed Aug 15, 2018 4:40 pm

Get YNAB.com. My offspring are about your age and married. I talked them into it and the’ve thanked me many times for the peace this brings to their marriage. If I had YNAB when I was your age I would be writing this from my private yacht in the Caribbean.
Best of luck

EngineerAndNurse
Posts: 5
Joined: Wed Aug 15, 2018 11:02 am

Re: Newly Married and Hoping to Start on the Right Foot

Post by EngineerAndNurse » Wed Aug 15, 2018 5:08 pm

Thank you all! We'll work on eliminating her student loans more aggressively.

I'll also chat with my wife about my loans. Assuming we don't make any changes there (not saying we won't...it's just that this arrangement is working well for all parties currently), what other changes would you make?

dalmatiandan
Posts: 33
Joined: Wed Dec 21, 2016 3:11 pm

Re: Newly Married and Hoping to Start on the Right Foot

Post by dalmatiandan » Wed Aug 15, 2018 5:48 pm

We are recently married as well, and my wife and I have a goal of establishing a DAF (Donor Advised Fund) in the future to help unwind appreciated shares. We will do this by bunching many years worth of planned charitable giving in order to take advantage of the deduction, assuming we clear the new, higher standard deduction limit for MFJ in that particular year.

Since you have a stated goal of 10% of income going to charitable giving, it’s something to consider in the future.

Just an idea! But I agree that loans should take priority.

Do you have a plan to increase your retirement contributions? We are aiming to increase by 1% every January until we “feel the pinch” and then will level off, for a bit.

All the best,
Dan

bob1234
Posts: 34
Joined: Fri Jan 20, 2012 2:09 am

Re: Newly Married and Hoping to Start on the Right Foot

Post by bob1234 » Wed Aug 15, 2018 6:21 pm

Congrats on the marriage! I would consider reducing the amount of charitable giving until loans are paid off. Consider donating your time through volunteering instead if you feel like you need to compensate for less monetary donations.

PFInterest
Posts: 2073
Joined: Sun Jan 08, 2017 12:25 pm

Re: Newly Married and Hoping to Start on the Right Foot

Post by PFInterest » Wed Aug 15, 2018 6:23 pm

Why are you doing r401k? You're in CA.

3funder
Posts: 672
Joined: Sun Oct 15, 2017 9:35 pm

Re: Newly Married and Hoping to Start on the Right Foot

Post by 3funder » Wed Aug 15, 2018 9:16 pm

runner540 wrote:
Wed Aug 15, 2018 3:13 pm
Congrats on the marriage, and a home purchase with solid down payment. Nice to see fellow Boglehead that prioritizes giving.

You should think about whether it's fair to the relative that is loaning you $24k at 0%, so you can put $500 into taxable. I would focus on paying off all the debts before any taxable saving.

Also, do a detailed estimate now of 2018 taxes and adjust your withholding as needed, to avoid any nasty surprises when filing.
+1.

Saving$
Posts: 1607
Joined: Sat Nov 05, 2011 8:33 pm

Re: Newly Married and Hoping to Start on the Right Foot

Post by Saving$ » Wed Aug 15, 2018 10:43 pm

Agree with paying off the relative. However, you seem resistant, so lacking that, here is what I would do:

1. Stop the $500 monthly contrib to brokerage account.
2. Use the emergency fund to pay off the $1600 student loan
3. Put the "found" $500 from item 1 and $200 from item 2 towards increasing TSP contribution - an additional $700/month should get you close to the TSP annual max limit. Or split between the 401a and TSP.
4. Further TSP & 401a should be pretax rather than Roth
5. Check budget to determine if you can increase payments to relative. Reconsider and pay it off, using savings. You are using relative's money to fund charitable contributions.
6. Reconsider amount of charitable contrib until you have
a. Maxxed out all retirement savings, including Roth and employer
b. Paid off ALL loans (including relatives)

User avatar
StevieG72
Posts: 819
Joined: Wed Feb 05, 2014 9:00 pm

Re: Newly Married and Hoping to Start on the Right Foot

Post by StevieG72 » Thu Aug 16, 2018 12:39 am

The best advice I have for you is to stay married!

Invest in your wife, do not take her for granted.

Kids are a game changer, I always wondered why so many couples seperated / divorced with kids just a few years old. Then it happened to me and in hindsight I understand! Don’t be that guy!
Fools think their own way is right, but the wise listen to others.

EngineerAndNurse
Posts: 5
Joined: Wed Aug 15, 2018 11:02 am

Re: Newly Married and Hoping to Start on the Right Foot

Post by EngineerAndNurse » Thu Aug 16, 2018 1:26 pm

PFInterest wrote:
Wed Aug 15, 2018 6:23 pm
Why are you doing r401k? You're in CA.
What do you mean by this? I go back and forth on whether or not Roth is the right answer and a few people have alluded to the fact that I should switch. Could someone please elaborate?

c1over8
Posts: 189
Joined: Fri Apr 01, 2016 10:15 am

Re: Newly Married and Hoping to Start on the Right Foot

Post by c1over8 » Thu Aug 16, 2018 1:39 pm

EngineerAndNurse wrote:
Thu Aug 16, 2018 1:26 pm
PFInterest wrote:
Wed Aug 15, 2018 6:23 pm
Why are you doing r401k? You're in CA.
What do you mean by this? I go back and forth on whether or not Roth is the right answer and a few people have alluded to the fact that I should switch. Could someone please elaborate?
Your taxes would be reduced (deferred) if you do traditional instead of roth.

EngineerAndNurse
Posts: 5
Joined: Wed Aug 15, 2018 11:02 am

Re: Newly Married and Hoping to Start on the Right Foot

Post by EngineerAndNurse » Thu Aug 16, 2018 1:40 pm

c1over8 wrote:
Thu Aug 16, 2018 1:39 pm
EngineerAndNurse wrote:
Thu Aug 16, 2018 1:26 pm
PFInterest wrote:
Wed Aug 15, 2018 6:23 pm
Why are you doing r401k? You're in CA.
What do you mean by this? I go back and forth on whether or not Roth is the right answer and a few people have alluded to the fact that I should switch. Could someone please elaborate?
Your taxes would be reduced (deferred) if you do traditional instead of roth.
The makes sense, but it was my understanding that if I assume we'll retire at a higher tax bracket than my current one, it's better to pay the taxes now instead of 40 years from now.

mega317
Posts: 2554
Joined: Tue Apr 19, 2016 10:55 am

Re: Newly Married and Hoping to Start on the Right Foot

Post by mega317 » Thu Aug 16, 2018 1:49 pm

I think you're overestimating your income tax a little. I calculate closer to 30k.

Why do you assume you'll retire in a higher bracket? It is possible (likely?) to draw a lot of retirement income that is untaxed, and you might end up in a different state with lower or no income taxes.

c1over8
Posts: 189
Joined: Fri Apr 01, 2016 10:15 am

Re: Newly Married and Hoping to Start on the Right Foot

Post by c1over8 » Thu Aug 16, 2018 1:54 pm

EngineerAndNurse wrote:
Thu Aug 16, 2018 1:40 pm
c1over8 wrote:
Thu Aug 16, 2018 1:39 pm
EngineerAndNurse wrote:
Thu Aug 16, 2018 1:26 pm
PFInterest wrote:
Wed Aug 15, 2018 6:23 pm
Why are you doing r401k? You're in CA.
What do you mean by this? I go back and forth on whether or not Roth is the right answer and a few people have alluded to the fact that I should switch. Could someone please elaborate?
Your taxes would be reduced (deferred) if you do traditional instead of roth.
The makes sense, but it was my understanding that if I assume we'll retire at a higher tax bracket than my current one, it's better to pay the taxes now instead of 40 years from now.
I agree with that statement but a lot of people on here will say to go traditional first without that analysis. I was just explaining what the other people mean. Not saying they are correct and not saying your assumption you'll be in a higher bracket later is correct - but you are in the best position to weigh the likelihood and make that decision.

HornedToad
Posts: 873
Joined: Wed May 21, 2008 12:36 am

Re: Newly Married and Hoping to Start on the Right Foot

Post by HornedToad » Thu Aug 16, 2018 2:02 pm

c1over8 wrote:
Thu Aug 16, 2018 1:54 pm
EngineerAndNurse wrote:
Thu Aug 16, 2018 1:40 pm
c1over8 wrote:
Thu Aug 16, 2018 1:39 pm
EngineerAndNurse wrote:
Thu Aug 16, 2018 1:26 pm
PFInterest wrote:
Wed Aug 15, 2018 6:23 pm
Why are you doing r401k? You're in CA.
What do you mean by this? I go back and forth on whether or not Roth is the right answer and a few people have alluded to the fact that I should switch. Could someone please elaborate?
Your taxes would be reduced (deferred) if you do traditional instead of roth.
The makes sense, but it was my understanding that if I assume we'll retire at a higher tax bracket than my current one, it's better to pay the taxes now instead of 40 years from now.
I agree with that statement but a lot of people on here will say to go traditional first without that analysis. I was just explaining what the other people mean. Not saying they are correct and not saying your assumption you'll be in a higher bracket later is correct - but you are in the best position to weigh the likelihood and make that decision.
If you are planning on retiring outside CA you should do traditional since then you defer the state income tax. Otherwise it comes to your other considerations on future income growth, early retirement with Traditional, etc

EngineerAndNurse
Posts: 5
Joined: Wed Aug 15, 2018 11:02 am

Re: Newly Married and Hoping to Start on the Right Foot

Post by EngineerAndNurse » Thu Aug 16, 2018 2:03 pm

HornedToad wrote:
Thu Aug 16, 2018 2:02 pm
c1over8 wrote:
Thu Aug 16, 2018 1:54 pm
EngineerAndNurse wrote:
Thu Aug 16, 2018 1:40 pm
c1over8 wrote:
Thu Aug 16, 2018 1:39 pm
EngineerAndNurse wrote:
Thu Aug 16, 2018 1:26 pm


What do you mean by this? I go back and forth on whether or not Roth is the right answer and a few people have alluded to the fact that I should switch. Could someone please elaborate?
Your taxes would be reduced (deferred) if you do traditional instead of roth.
The makes sense, but it was my understanding that if I assume we'll retire at a higher tax bracket than my current one, it's better to pay the taxes now instead of 40 years from now.
I agree with that statement but a lot of people on here will say to go traditional first without that analysis. I was just explaining what the other people mean. Not saying they are correct and not saying your assumption you'll be in a higher bracket later is correct - but you are in the best position to weigh the likelihood and make that decision.
If you are planning on retiring outside CA you should do traditional since then you defer the state income tax. Otherwise it comes to your other considerations on future income growth, early retirement with Traditional, etc
Great! Thank you all for the explanations. Our hope is to never leave California (obviously life happens and things could change) but we're operating under the assumption that we're here for good.

Darth Xanadu
Posts: 422
Joined: Sat Jan 27, 2018 1:47 am
Location: Middle Earth

Re: Newly Married and Hoping to Start on the Right Foot

Post by Darth Xanadu » Thu Aug 16, 2018 2:59 pm

I would also suggest traditional 401k. Take the tax savings now. You may be able to pay little or no federal tax on withdrawals/conversions down the road. Or not, as the future is unknown, but what is known is a current-year tax break. Utilize Roth IRA for tax diversification.

Just my 2 cents.
"A courageous teacher, failure is."

PFInterest
Posts: 2073
Joined: Sun Jan 08, 2017 12:25 pm

Re: Newly Married and Hoping to Start on the Right Foot

Post by PFInterest » Thu Aug 16, 2018 3:37 pm

EngineerAndNurse wrote:
Thu Aug 16, 2018 1:26 pm
PFInterest wrote:
Wed Aug 15, 2018 6:23 pm
Why are you doing r401k? You're in CA.
What do you mean by this? I go back and forth on whether or not Roth is the right answer and a few people have alluded to the fact that I should switch. Could someone please elaborate?
you should be doing traditional 401k contributions given your higher marginal tax rate.

Post Reply