Advice for late starter(s)?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
Topic Author
muredhawk235
Posts: 40
Joined: Wed Jul 29, 2015 9:55 pm

Advice for late starter(s)?

Post by muredhawk235 »

I’ll try to post as much info as possible and I would really appreciate any feedback/advice.

I consider both my wife and I late starters. I went to grad school and didn’t really start saving for retirement until I was 26/27, my wife started working right out of college but was the type of person that didn’t want to lock up her money in a retirement account she didn’t have access to, so she didn’t save much. This changed a few months ago when she changed roles at her work and took a 30k pay cut.
Between the two of us we bring in ~77,800 plus 7-10k depending on bonuses (Me=~25,400, Her=~72,400). That is after taxes, health insurances, retirement contributions, etc.

Emergency funds:
Currently 24k, want it to be 30k (going back to her not wanting all her money tied up in retirement accounts).
We also have 3 dogs, 2 cats, and at any given time have 3-5 foster kittens we keep until they get fixed so I am ok with having a larger E-fund, especially for the kittens.

Debt:
Mortgage: $1065 (112,000 left @ 3.5%)
Car1: 2014 Ford Focus - $338 (12,600 left @ 1.8%)
Car2: 2014 Ford Escape - $470 (16,000 left @ 1.85%)
Student Loan 1: $360 (40,000 all @ 3.95%), paying minimum on this
Student Loan 2: $400 (12,000 @ 3.5-6.55%). 200min +200 extra. I am currently paying an additional 200 a month toward 1 of the loans with the 6.55%. Once that is paid off I will move onto the other that is at 6.55%. Then put that money towards the larger loan in this group which is at 5.7%.
Credit Card: Our monthly CC budget is 2000. We pay it off in full every month. This 2000 includes any bills, groceries, gas, etc for the entire month.

Tax Filing Status: Married Filing Jointly
Tax Rate: 25% Federal, 3.465% State
State of Residence: OH
Age: Me-29, Her-28
Desired Asset allocation: Currently I am fine with 90/10.


Current retirement assets

Taxable
Scottrade account – 2,500
11.62% AAPL
18.30% ACWI
46.76% HTA
8.52% LUV
14.45% MSTR
0.35% WLL

His 403b – $3,000
Vanguard Institutional Target Retirement 2055 Institutional(0.10%)
No company match, currently contributing 10%

His Rollover IRA Fidelity - $3,500
Fidelity® Total Market Index Fund Investor Class (0.09%)

His HSA - $2000
Contribute ~2% ($32) a pay check, company adds 1000, 250 every quarter.

His Pension - $6,000
My company offers a pension plan. They dump 15% of your annual salary into a bucket every year. However if, in your first 3 years, your total pension amount doesn’t equal 30k, then they will give you 30k. For instance I am eligible for ~6000 every year based on my salary. In three years I would only have 18k, so they will instead give me 30k, there after it will be 15%

His whole life insurance policy (executive protector) – cash value $3,776
It is for 25k with paid up additions of 15,000. This was taken out by my grandparents when I was 1 and then given to my parents sometime when I was a teenager. When in my parent’s hands, they did not pay premiums and a loan was taken out on the policy to pay for itself (or something).

There is a loan balance of $590@ 7% so I pay $183.2 annually


Her 401k – $15,000
Vanguard Institutional Target Retirement 2055 Institutional(0.10%)
Company match is 5%, currently contributing 7%

Her Rollover at Scottrade – $16,000
Vanguard 500 Index Fund- Inv (0.16%)
Her HSA - ~$7,000
Maxed every year





Contributions

New annual Contributions
$3878 his 403b
$1768 his HSA (1768 me + 1000 employer)
$14,832 her 401k (8654 her + 6187 from employer)
$3350 her HSA
$5500 her Roth IRA – once our savings goal is met, I am going to try to get my wife to use most of her bonus to max out a roth every year.

Well there is a ton of info here and I hope it’s clear. If I missed anything crucial please let me know and I will update the OP as soon as I can. Thanks for taking the time to go through it.


Questions:
1. Taxable Account: Is the taxable account even worth having? We do no contribute to it and it just sits there. We have had it for years. Would you recommend cashing it out and paying down some of the higher interest student loan debt.

2. Whole Life: I have a 250k term in place now with a 1x salary from my job. I know there is an anti whole life policy vibe here and elsewhere unless they are old policies. Is mine worth keeping around?

3. Before any one says it, I hate my car and I plan on selling it in a year or so and using the money + savings to buy a used vehicle. haha
Last edited by muredhawk235 on Wed Jul 13, 2016 5:47 am, edited 1 time in total.
jfave33
Posts: 3287
Joined: Thu Mar 19, 2015 6:18 pm

Re: Advice for late starter(s)?

Post by jfave33 »

Why married filing separately?

You should be able to be in the 15% bracket with your income and retirement savings.

Why roth and not traditional IRAs?

You are still in your 20s so plenty of time to catch up. You have a high take home income and should be able to save more aggressively if you are both willing to. If your wife does not like retirement accounts then consider directing some extra funds to pay off all those loans.

I wouldn't keep the taxable. Owning small portions like $250 in apple stock isn't worthwhile. Put it in with your retirement accounts or pay off high loans.

No idea about the insurance policy.
delamer
Posts: 17348
Joined: Tue Feb 08, 2011 5:13 pm

Re: Advice for late starter(s)?

Post by delamer »

1. Yes, cash in the taxable and put toward the student loans.
2. I would not keep the whole life. Put the cash value toward the student loans. If you don't have term coverage for your wife, look into that.

Reasonable people can differ on this, but I would put most or all of the $5,500 Roth money toward the student loans. $52,000 is a lot of money relative to your income.

Did you really mean that you are filing your taxes separately, or was that a typo? Also, is it cheaper for you to have separate health insurance? I only have a passing familiarity with HSA's but the amount you are putting away seems pretty high for two people your age.

$800/month for car loans is high, but you'd be better off to pay off the vehicles and keep them until they die.

I haven't been in my late 20's for a long time, unfortunately :( , but $2,000 a month seems to be pretty high for food, gas, utilities, and incidentals for two people. If you could cut that back by a few hundred dollars a month, you could do with even more to reduce those student loans.


You certainly on the right track; I'd just be more aggressive with the student loans.

Good luck!
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
User avatar
LAlearning
Posts: 1365
Joined: Wed May 09, 2012 12:26 pm
Location: Los Angeles

Re: Advice for late starter(s)?

Post by LAlearning »

Lol being in your 20s is not a late start ..
I know nothing!
JD2775
Posts: 1503
Joined: Thu Jul 09, 2015 10:47 pm

Re: Advice for late starter(s)?

Post by JD2775 »

LAlearning wrote:Lol being in your 20s is not a late start ..
I was gonna say...

I didn't really start saving till I was 38. I was I were in my 20s.
Good luck OP
Engineer250
Posts: 1082
Joined: Wed Jun 22, 2016 1:41 pm

Re: Advice for late starter(s)?

Post by Engineer250 »

Leave emergency fund as is. Pay off student loan debt. Then tackle car debt. Don't buy new ones, the best way to get the most from your loans is to pay them off and drive until they die. Save cash and buy used for your next one.

That's a lot of debt. Don't take on any more. Keep retirement as-is. Pay off all non-mortgage debt. Then you can beef up emergency fund and max out retirement. Good work on what you guys do for the kitties, that is commendable work.
Where the tides of fortune take us, no man can know.
Topic Author
muredhawk235
Posts: 40
Joined: Wed Jul 29, 2015 9:55 pm

Re: Advice for late starter(s)?

Post by muredhawk235 »

Sorry, I did mean to put filling jointly. I have updated the OP
jjface wrote: Why roth and not traditional IRAs?
I suggested this to my wife primarily because I thought that there would be less of a penalty if we had to take money out early. Since she didn't want to "lock it" up in a 401k, I figured this route would be a compromise to still save money for retirement but allow her the peace of mind to have access to it if something were to happen.
JD2775 wrote:
LAlearning wrote:Lol being in your 20s is not a late start ..
I was gonna say...

I didn't really start saving till I was 38. I was I were in my 20s.
Good luck OP
LAlearning wrote:Lol being in your 20s is not a late start ..
Sorry if this came across as rude. I just feel very far behind due to my low salary and student loan debts.
delamer wrote:
Also, is it cheaper for you to have separate health insurance? I only have a passing familiarity with HSA's but the amount you are putting away seems pretty high for two people your age.

I haven't been in my late 20's for a long time, unfortunately :( , but $2,000 a month seems to be pretty high for food, gas, utilities, and incidentals for two people. If you could cut that back by a few hundred dollars a month, you could do with even more to reduce those student loans.

Good luck!
Thanks,

I'll have to look back into the health care costs. The jobs we had when I got out of grad school had an additional charge if you put your spouse on your plan if their employer offered them health care. So it was cheaper to be separate back then. I am not sure about that now though since we are both working for different employers.

$2,000 is our max, but we usually don't spend that much. The past 4 months it has been around 1500.

We both have recently gone through our expenses and cut out things we didn't use such as gym memberships, cable, netflix dvd, and so on.
Engineer250 wrote: That's a lot of debt. Don't take on any more. Keep retirement as-is. Pay off all non-mortgage debt. Then you can beef up emergency fund and max out retirement. Good work on what you guys do for the kitties, that is commendable work.
Trust me I hate my debt and I honestly regret getting the car. I was driving a 99 honda civic before then and every week I always think that I could have my smaller loan gone by now if I had just kept the civic. I'll be sticking with used ones from here on out.
jharkin
Posts: 3469
Joined: Mon Mar 28, 2016 7:14 am
Location: Boston suburbs

Re: Advice for late starter(s)?

Post by jharkin »

jjface wrote:Why married filing separately?

You should be able to be in the 15% bracket with your income and retirement savings.

Why roth and not traditional IRAs?

OP mentioned that he nets 78k +another 10% or so in bonuses. This means there household gross is probably over 120k which puts them out of the 15% bracket and deductible IRA eligibility.

I agree with using MFJ. There are very few good reasons to use MFS.......

LAlearning wrote:Lol being in your 20s is not a late start ..
+1 OP - Don't be hard on your self. I agree as a newcomer here that it feels like every member of this board is a 40 year old millionaire who will retire to sail the globe at 50... But out in the real world you are doing just fine. Half of all household or so save nothing at all and retire on nothing but SS and home equity. You still have 30+ years to catch up and you WILL BE OK. Deep breath. Don't worry.

delamer wrote:... $2,000 a month seems to be pretty high for food, gas, utilities, and incidentals for two people. If you could cut that back by a few hundred dollars a month, you could do with even more to reduce those student loans.
If its including the car insurance bills, utilities, phone, TV and random spending like entertainment, hobbies, clothing, home repairs, etc.. it doesn't sound all that high to me for a moderate to high COL area....


----


My thoughts:

#1 - Dump the whole life. you both work so nobody depends on your income to survive. Consider term policies at least 10x salary if/when you have kids.
#2 - Good decision to keep the EF. Once you get the debt under control 6 months salary should be good assuming you aren't in an extremely risky field.
#3 - Attack the debt! Conventional wisdom says go after the highest interest rates first so that means the student loan. There is a wrinkle however if you have volatile job security. If you go on unemployment, federally backed student loans can be deferred till you get back to work. The cars will get repossessed. You need to do what feels best.
#4 As you get the debt under control work your way up to maxing 401, 403 and roth.


Dont forget that the pension you have is valuable.... What does the 30k after 3 years translate into in terms of payout in retirement?



Dont feel discouraged if it takes time, you will get there. I just turned 40 and I still have not gotten to fully maxing all retirement options.
Topic Author
muredhawk235
Posts: 40
Joined: Wed Jul 29, 2015 9:55 pm

Re: Advice for late starter(s)?

Post by muredhawk235 »

jharkin wrote: My thoughts:

#1 - Dump the whole life. you both work so nobody depends on your income to survive. Consider term policies at least 10x salary if/when you have kids.
#2 - Good decision to keep the EF. Once you get the debt under control 6 months salary should be good assuming you aren't in an extremely risky field.
#3 - Attack the debt! Conventional wisdom says go after the highest interest rates first so that means the student loan. There is a wrinkle however if you have volatile job security. If you go on unemployment, federally backed student loans can be deferred till you get back to work. The cars will get repossessed. You need to do what feels best.
#4 As you get the debt under control work your way up to maxing 401, 403 and roth.


Dont forget that the pension you have is valuable.... What does the 30k after 3 years translate into in terms of payout in retirement?



Dont feel discouraged if it takes time, you will get there. I just turned 40 and I still have not gotten to fully maxing all retirement options.
Thank you for your input.

Currently my wife job is rather secure. She has had many good words said about her from the higher ups so I think she will be fine.

I do research and currently my boss has funding for at least the next 4 years so I am good in the short term. He has mentioned he would like me to go back and get a PhD with him as a part time graduate student. So I would be getting paid the same but going to grade school when I can (this would be covered by the employer since we get tuition reimbursement). If I decided to do that I would be in my current role for 5-7 years.

Currently I am paying extra on the highest interest rates and will continue to do so. Slowly cutting away at the debt.
Post Reply