What should we do next?

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Topic Author
cashisking500
Posts: 52
Joined: Fri Dec 02, 2016 1:08 pm

What should we do next?

Post by cashisking500 » Tue Jun 11, 2019 1:16 pm

Bogleheads,

Below is a snapshot of our current financial situation. After all bills are paid and current contributions (listed below) are made, we have about $2,000 left over each month. We are both 35 years old, have one child (9.5 months), currently contribute 15% of gross income to retirement and are as career stable as one can be these days (I think...haha):

Mortgage: Owe $337,000 on 30 year @ 3.75%
Debt: One car loan - owe $14,500 @ 0% ($285/month)
My 401K: $90,000 balance (contributing 10%/employer matches up to 5%)
Her Roth 401K: $30,000 balance (contributing 5%/employer matches up to 3%)
My Roth: $30,000 balance (contribute max - $500 per month)
Her Roth: $6,500 balance (contribute max - $500 per month)
529: $3,500 balance (contribute $250 per month)
E-Fund: $50,000 cash in high yield account

I would love to get some feedback on where to direct these extra funds. Thanks!
Last edited by cashisking500 on Wed Jun 12, 2019 1:05 pm, edited 2 times in total.

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Makaveli
Posts: 538
Joined: Mon May 19, 2014 11:18 pm

Re: What should we do next?

Post by Makaveli » Tue Jun 11, 2019 1:20 pm

Looking good. Top off her rIRA then fill up 401ks with any surplus. Long term goal of maxing all tax advantaged accounts and transitioning to taxable. Onwards.

Thegame14
Posts: 1044
Joined: Mon May 07, 2018 11:53 am

Re: What should we do next?

Post by Thegame14 » Tue Jun 11, 2019 1:30 pm

ID put more in 401K to get the tax break.

bloom2708
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Location: Fargo, ND

Re: What should we do next?

Post by bloom2708 » Tue Jun 11, 2019 1:35 pm

Thegame14 wrote:
Tue Jun 11, 2019 1:30 pm
ID put more in 401K to get the tax break.
+1 up your pre-tax percentage until you hit the $19k for each. Match dollars do not count toward your $19k limit each per year.

You defer the fed tax at your marginal rate and state tax (if applicable).

2 x 401k and 2 x Roth are the floor. Then everything on top is gravy.
Last edited by bloom2708 on Tue Jun 11, 2019 1:37 pm, edited 1 time in total.
"We are not here to agree with you; we are here to provoke thoughtfulness." Unknown Boglehead

123
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Re: What should we do next?

Post by 123 » Tue Jun 11, 2019 1:36 pm

I agree with the advice to top off her IRA each year as well as top off the 401k's.

As attractive as traditional 401ks are for tax-deferred savings it's helpful to have taxable investment accounts as well. In a taxable investment account you get the advantage of long-term capital gains tax treatment, a great tax savings. The tax-deferred growth of stock investments in a 401k is great but it comes at a great price, you pay regular income tax on the gains instead of lower capital gains taxes. Having taxable investments does give you more options down the road.

A risk of having most of your investments (non-emergency funds) in a tax deferred retirement accounts is that when you want to use any funds the tax man is waiting.

We don't know your income/tax brackets. You may want to look into Coverdell Educational Savings Accounts ($2,000 max yearly contribution) in addition to the 529. There are income limits on contributions so they might not work for you. They are somewhat more flexible than 529 plans (investment options). Not available with every brokerage, I think Schwab still offers them.
The closest helping hand is at the end of your own arm.

Rus In Urbe
Posts: 377
Joined: Sat Dec 09, 2017 2:12 pm

Re: What should we do next?

Post by Rus In Urbe » Tue Jun 11, 2019 1:56 pm

You're doing great!

If the car loan jumps above 0% (as they tend to do), pay it all off.
Go to the max on all tax-advantaged accounts.
Great you've got the 529 started, and Roths.
Good choices, all.
Continue to sock away the rest to a mix of Vanguard (or wherever) index funds (equities/bonds/etc to match your preferred AA). I'm a great believer in paying off mortgages, but you've got such a great rate going there, that you shouldn't do that until you really can't find anywhere else to put the money (which may happen to you).

You may do this already, but, as time goes on, step back regularly to think about maintaining diversification, and adjusting risk exposure as your wealth accumulates. Analyze "what ifs" (loss of job, health issues, whatever) and make sure you have the rest of the basics covered: wills done, appropriate insurance. Spend some time cultivating and assembling an A-Team of experts (lawyer, tax accountant, doctors, etc.)

Finally----Take some time with your partner to think about what makes you happy. You're on a good path of saving---but you also want to make sure you are enjoying life; my DH and I are very naturally frugal, but I have found that an occasional planned-for splurge has been a great incentive to continue saving (counter-intuitive as that may sound, and of course this advice only works for savers, as you clearly are).

Above all, take time to enjoy your child, each other, and your very well-ordered life that seems to be on a great track.

Cheers! :beer
I'd like to live as a poor man with lots of money. ~Pablo Picasso

soccerrules
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Re: What should we do next?

Post by soccerrules » Tue Jun 11, 2019 2:08 pm

another vote for fill up your 401K's -- you can each contribute $19K a year. After 12/31 any space left in the $19K bucket is gone. You can not go backwards and fill up prior years. As your income grows over the next 10-15 years, you will wish you would have taken advantage of that "space" if you didn't.

When you max out 401K's , hit the rIRA or tIRA --then add to taxable.

BIG focus on staying the course. It will feel like you are not making much progress. Keep the right AA for you and your ability to take on the risk. When you hit age 50 compounding interest will be your friend and your balances will start to move at a more rapid pace.

I was talking to one of my kids who had received a $6K raise. Told them if they could save this raise for 6 years starting at age 25. So accumulating $35-36K by age 31 and they stop saving (don't advise), then in 30 years (age 61) assuming 8% return --they would have @$350K, wait to age 35 saving the same $35K, by age 61 only $175K -- it's that extra 9 years at 8% (rule of 72) doubling period at the end that really counts.
1st 9 years (25-34) the $35K doubles to $70K -- $35K increase
last 9 years (52-61) $175K to $350K - $175K increase.

Save/Invest early and often.
Don't let your outflow exceed your income or your upkeep will be your downfall.

Topic Author
cashisking500
Posts: 52
Joined: Fri Dec 02, 2016 1:08 pm

Re: What should we do next?

Post by cashisking500 » Wed Jun 12, 2019 8:04 am

Thanks to everyone for their suggestions. Last night, I bumped up my wife's Roth IRA contribution....so now we are both maxing it out. I'll look at the 401K next to see what adjustments we might be able to make there. At what point should I contribute more to my HSA?

cableguy
Posts: 30
Joined: Thu May 09, 2019 3:34 pm

Re: What should we do next?

Post by cableguy » Wed Jun 12, 2019 8:13 am

More in 529 plan. When you kid is a senior in high school, you'll be older and more vulnerable to the job market. Its a good feeling knowing you have money in 401k and your kid's tuition is mostly covered.

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simplesimon
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Location: Boston, MA

Re: What should we do next?

Post by simplesimon » Wed Jun 12, 2019 8:15 am

cashisking500 wrote:
Wed Jun 12, 2019 8:04 am
Thanks to everyone for their suggestions. Last night, I bumped up my wife's Roth IRA contribution....so now we are both maxing it out. I'll look at the 401K next to see what adjustments we might be able to make there. At what point should I contribute more to my HSA?
Assuming the HSA has decent investment options, I'd look to fill that up before increasing 401K. Of course, eventually max everything.

Topic Author
cashisking500
Posts: 52
Joined: Fri Dec 02, 2016 1:08 pm

Re: What should we do next?

Post by cashisking500 » Wed Jun 12, 2019 8:49 am

Excellent suggestions. I am going to increase our daughter's 529 contribution now. I'll take a look at the 401K today as well. Thanks all!

Topic Author
cashisking500
Posts: 52
Joined: Fri Dec 02, 2016 1:08 pm

Re: What should we do next?

Post by cashisking500 » Wed Jun 12, 2019 1:06 pm

I just updated our contributions to reflect the changes we've made today based on the great feedback from those here. We are now maxing out my wife's Roth IRA and added $50 more per month to our daughter's 529!

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FelixTheCat
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Re: What should we do next?

Post by FelixTheCat » Wed Jun 12, 2019 1:10 pm

To give my hindsight advice, I wish I maxed out my 401K each year.

Here's the Boglehead wiki on prioritizing investments https://www.bogleheads.org/wiki/Priorit ... nvestments
Felix is a wonderful, wonderful cat.

Olemiss540
Posts: 975
Joined: Fri Aug 18, 2017 8:46 pm

Re: What should we do next?

Post by Olemiss540 » Wed Jun 12, 2019 4:39 pm

FelixTheCat wrote:
Wed Jun 12, 2019 1:10 pm
To give my hindsight advice, I wish I maxed out my 401K each year.

Here's the Boglehead wiki on prioritizing investments https://www.bogleheads.org/wiki/Priorit ... nvestments
This is a great reference.

Op,

What's your incomes and marginal tax rate? HSA is a very valuable investment tool which is triple tax advantaged, as well as exempt from payroll taxes!
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

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