Advice: Benefits in Early Career

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DollarsInMyRamen
Posts: 23
Joined: Wed Jul 06, 2016 10:23 pm
Location: Portland, OR

Advice: Benefits in Early Career

Post by DollarsInMyRamen »

Hello all,

My significant other (22) is starting a career next month. We hope to seek some Boglehead advice to navigate benefit options.

Washington State: ~$60,000 gross income, 0% state income tax, 24% federal.
This should allow for about just under $50,000 in take-home pay if I did the math right.

Monthly budget of around $2,500, leaving close to $1,500 for discretionary/loan payback/saving/investing.

Savings + checking = $20,000.

Student loans: $65,000, currently all at 0% interest, but weighted average interest rate is 5.7%. Considering a refi or PSLF.

Benefits Options:
HDHP/HSA: Administered by HealthEquity
Employer contributes $600/year. As far as I can tell, the plan does not have any additional costs except for the few bucks a month for vision.

401k/Roth and 457b/Roth:
Employer offers both options through Fidelity.
Company match on 401k - “after working 1,000 paid hours each year, contributions are matched 100% on the first 1% plus 50% on the next 5% of contributions. (Employer match would be pre-tax, even if my contributions were Roth).


Plan:
Loan payback will likely consume about half of the discretionary income, leaving $700 per month. Using these funds, we could contribute about $300 a month to a Roth 401k to meet the company match. Then, contribute $250 a month to the HSA. Leaving the remainder as discretionary income OR funding a Roth IRA with any additional savings.

Does this plan make sense to you?

I appreciate any advice and critiques - thank you,
$Ramen
Last edited by DollarsInMyRamen on Fri Sep 18, 2020 7:48 am, edited 1 time in total.
MotoTrojan
Posts: 10652
Joined: Wed Feb 01, 2017 8:39 pm

Re: Advice: Benefits in Early Career

Post by MotoTrojan »

I would confirm if Roth 401k contributions are acceptable for the match. I know the company can only contribute the match as pre-tax, so worth double checking that you’ll still get it if your contribution is Roth.

Unless you can get that 5.7% WAY down I would probably put every penny beyond the match towards that before saving much more. One option to compliment that would be to use your Roth IRA as an emergency fund (leave contributions in money market). If an emergency comes up, you withdraw penalty free, lose your contribution ability, but life goes on. If there isn’t an emergency you can move the contribution to your longterm asset allocation once you get a standard/taxable emergency fund built up (perhaps after the loan is better handled). 5.7% after-tax return is hard to come by, let alone risk free.
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Topic Author
DollarsInMyRamen
Posts: 23
Joined: Wed Jul 06, 2016 10:23 pm
Location: Portland, OR

Re: Advice: Benefits in Early Career

Post by DollarsInMyRamen »

MotoTrojan wrote: Fri Sep 18, 2020 7:34 am Unless you can get that 5.7% WAY down I would probably put every penny beyond the match towards that before saving much more.. 5.7% after-tax return is hard to come by, let alone risk free.
Great points - we both have strong credit scores, so I’m sure a ReFi could get it pretty far down. Her work also helps to pay down the debt ~$3,000 a year no strings attached. So there are a few games to be played with the student loan debt. We’re still deciding the best plan of attack there - thanks to the help of others on this blog. The 0% interest rates are sure nice for the time being.

I do love the flexibility of the Roth IRA - perhaps that should move up the priority list.

$Ramen
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