Investing advice for a new parent

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newparentNYC
Posts: 32
Joined: Sun Apr 04, 2021 1:52 pm

Investing advice for a new parent

Post by newparentNYC »

Hello, I am a late 30s man, married, with a 1 year old baby, born at the start of March last year right before the pandemic really kicked in. Overall I think my family is in pretty solid financial shape but with the addition to our family I wanted to post on here to see if you have any advice or if there is anything I am not yet thinking about. In particular I have not yet opened or contributed to any accounts for our child (529 or otherwise), and would appreciate any pointers or considerations on that matter.

Emergency funds: Have this.

Debt: None

Tax Filing Status: Married Filing Jointly

Tax Rate: 35% Federal, 6.85% State, 3.876% Local

State of Residence: NY (NYC)

Age: 38

Desired Asset allocation: 85% stocks / 15% bonds
Desired International allocation: 10-15% of stocks

Current assets

Cash
~$450k (of which lets say $100k is emergency fund, let's say around $12k / month in expenses between rent of $6k and other spend, though of course in a true emergency we would cut the other at least in half).

Taxable
$450k Taxable Betterment account (90/10 allocation skewed more to US than international)
$190k Vanguard Taxable (mostly in VTI)
~$30k in other taxable accounts (TDA & Chase accounts, mostly VTI)
$5k coinbase account

Total = $675k
Total non-retirement assets = $1.1m

~$100k RSU vesting over the next 3 years

Retirement
$450k employer 401ks (wife and myself combined, $3k annual employer match for myself) 80/20 allocation
$31k individual 401k belonging to my wife 80/20 allocation

$125k Roth IRA (combined between myself and my wife, we do full backdoor Roth each year) - entirely in Vanguard Total Stock Market mutual fund

Total retirement = $606k

Total Assets = $1.8m
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New annual Contributions
$19k / yr to my 401k + $3k employee match
Maximum amount to wife's i401k but this is dependent on her freelance earnings, likely around $10k contribution for last year

Combined earnings of about $500k / yr consisting:
$450k earnings for myself ($250k salary, $200k bonus of which 80% cash, 20% RSU)
approx $50k earnings in freelance work for my wife (less last year due to having a baby)

Overall in 2020 our cash flow was up ~$125k for the year (not including my 401k contribution), obviously it was an abnormal year with the pandemic and the baby. We had some months of very little non-rent expense and some of very high (e.g. healthcare expenses). This year I would expect our cash flow to be similar as we have some higher expenses (and also lots of pent up travel demand) offset by the cash portion of my bonus ~50k higher than last year. Overall I would expect my income to continue to increase at a moderate rate going forward (say $25-$100k / year growth at least for a couple more years depending on the year).

Questions:
1. I know I have a lot of cash. The origin is that I decided to lighten up considerably on my allocation towards stocks during the pandemic. Not the best call but I also wasn't in a great mental place after the birth of our child, the pandemic, and we also thought we might want to buy an apartment at the time so I wanted to be sure to have cash on hand in case we decided to go for that. On the one hand I at least waited until the markets recovered a fair amount before I raised any cash, on the other I've been a little slow redeploying (I tend to prefer DCA despite knowing that it doesn't make sense). Currently I have a weekly $15k deposit into our Betterment account (which we have because a previous employer required pre-approval for every stock transaction outside of a managed account, so it was too painful to manage my own at that time), and I am opportunistically shifting back more into stocks as conditions allow, though I am probably just going to increase my weekly allocation to get back to $200kish cash over the next month. Does that seem reasonable?

2. Really, my main question is what, if anything, should I be doing differently now that we have a child? Currently my wife stays home with him so we do not have a ton of childcare expenses though of course her earnings have decreased as a result. In the next few years its possible we'll decide to leave NYC and buy a house in the suburbs though I am not rushing to do that either. Is there much advantage to opening a custodial account for my child and investing for him there? Tax implications of doing so? or is a 529 plan the way to go?
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