Request to review financial situation

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Topic Author
goggledude
Posts: 3
Joined: Sat Mar 23, 2019 11:37 am

Request to review financial situation

Post by goggledude » Sat Mar 23, 2019 11:49 am

Members,
First of all a big thank you sharing your thoughts and ideas here. This is really helpful for newbies like myself.

I have been reading this website for few months now and based on the quality of suggestions here, I have decided to share my details and seek advice.

Pls see below our details about us:
Family of 3
He : working in finance/IT
She : Just started working
Combined pre Tax - 200K (after adding her salary :32 K /year)
4 year old daughter
Living in HCOL area


Emergency funds: 6 months (Cash)
HSA : 12K
Debt: Paid off car loan , pay credit card every month , No mortgage (Renting)
Tax Filing Status: Married Filing Jointly
State of Residence:NJ
Age:He 36 , She 35
Desired Asset allocation: 80% stocks / 20% bonds

Current Assets

Taxable Investment account
25K ( individual stocks )

His 401k
45K - 3 fund portfolio
Company match? Yes

His rollover Roth IRA
8K - individual stocks

We know that we are behind our retirement savings as we started late (immigrants) .

Other savings :

Saving for down payment (Target home price 500K) This will only get us condo/town home in good school district
60K : 1 yr CD
30K : high interest rate savings account

Current Retirement Contributions

He maxing out 401K (3 fund portfolio) - 19K
Her : none - just started (question below)

529- started 3 months back for 4 year old - 500/mo

Monthly expenses : 4200 (rent :2200)

Sorry for long post already, now I have few questions, Please comment.

1. Buying home : Should we continue saving down for house and buy home once we have 125K (20% down plus closing)? We are targeting in couple of year when our daughter starts elementary school. Or buying is not a good idea and continue renting (number above).

2. Retirement Saving: Since wife just started working we checked her 401K option. Not good: No matching , expensive (exp% 0.8), no low cost indexing options. We are thinking of putting down 6K every year in her 401 K and 5K in Roth IRA (believe we qualify as our AGI < 199K). Please suggest if this look okay or what other option we have.

3. Anything else we should be working on ? Are we missing something (with regards of person finance)?


Thank you for your attention,


[Edit: Added HSA info]

bayview
Posts: 1869
Joined: Thu Aug 02, 2012 7:05 pm
Location: WNC

Re: Request to review financial situation

Post by bayview » Sat Mar 23, 2019 11:11 pm

Welcome to Bogleheads! I’m bumping your post to keep it on the front page.

Note to other readers: although it shares the recommended Personal Investing format, OP’s questions are actually personal finance related (home buy vs rent; best way to approach retirement savings)
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

pasadena
Posts: 333
Joined: Sat Jul 02, 2016 1:23 am
Location: Washington State

Re: Request to review financial situation

Post by pasadena » Sun Mar 24, 2019 12:36 am

Welcome to the forum!

1) is a very personal decision. Since you're not there yet anyway, I'd just keep saving and make a decision once you have the money. Note that you need about 10% of the home price above the downpayment, for closing (edit: which you already factored in!) and ancillary costs, and I also suggest having 5% more for unforeseen costs, furniture, etc.

2) I would max out her Roth IRA (6k in 2019. If you can do directly, perfect, otherwise, use the backdoor method), then invest in her 401(k) as much as you can - even with no match and limited fund choices, it's usually better than paying taxes and investing what's left. Not to mention that she's young, so chances are that she will someday change employer and be able to roll it over to an IRA or a better plan. Prioritize retirement savings over college savings for the kid.

Also fund your own Roth IRA, and max-out your HSA.

Beyond that, I would get rid of the individual stocks and invest everything in the 3-funds portfolio.

Topic Author
goggledude
Posts: 3
Joined: Sat Mar 23, 2019 11:37 am

Re: Request to review financial situation

Post by goggledude » Sun Mar 24, 2019 8:20 pm

Thank you so much for the response back.

Quick follow up re #2: my understanding is we both are eligible to contribute 6K i.e. 12K total. Correct ?
What should be the preference ?
1) Her Roth IRA (6K)
2) His Roth IRA (6K)
3) Her 401K (as much as we can afford , we are thinking 6K)

Or 1,3 and then 2??

stan1
Posts: 7721
Joined: Mon Oct 08, 2007 4:35 pm

Re: Request to review financial situation

Post by stan1 » Sun Mar 24, 2019 8:51 pm

goggledude wrote:
Sun Mar 24, 2019 8:20 pm
Thank you so much for the response back.

Quick follow up re #2: my understanding is we both are eligible to contribute 6K i.e. 12K total. Correct ?
What should be the preference ?
1) Her Roth IRA (6K)
2) His Roth IRA (6K)
3) Her 401K (as much as we can afford , we are thinking 6K)

Or 1,3 and then 2??
Given there is no match and her fund choices aren't good I'd do 1, 2, then 3. If she might change jobs within a few years she'll roll the 401K over to what is hopefully a better plan at her next employer. If your income level is close to the max for direct Roth IRA contributions look up "Back Door Roth IRA" since neither of you has Traditional IRAs. I'd also consider doing a Roth 401K contribution for you since you might be in a relatively low tax rate now compared to what you will be if your incomes grow in the future.

Ideally I'd want to have $150-200K saved up to buy a $500K home. That will give you 20% down and as first time homebuyers you'll find there are a lot of additional expenses. It might be a town home but if possible try to get 3 bedrooms/2 baths in a well located area that will always be popular with buyers. With your daughter being 4 I do understand you might want to purchase sooner so that she'll be in the same school starting with kindergarten.

Your time will be full with family. You have low expenses. If your incomes go up you'll be in a great position.

Topic Author
goggledude
Posts: 3
Joined: Sat Mar 23, 2019 11:37 am

Re: Request to review financial situation

Post by goggledude » Mon Mar 25, 2019 11:04 am

Thank you for the responses.

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