Firstly, I sympathize with all those struggling personally and professionally because of this pandemic. The impact on myself in 2020 was lucky in the spectrum of things - 10% cut in pay for 9 months (restored 1/1/21) and no 401k match. I also furloughed 6 members my team last year while watching many co-workers move on.
I mentioned in last years post my wife starting her first nursing job in February 2020. What a time to start a career in nursing! She has done amazing. She was just promoted from a contract type role to full time that will get her a small pay bump, a few more hours, and access to a 457(b).
The toughest area for us in 2020 was trying to have our first child. We hoped to be planning #2 this year. We are still trying for #1. We have exhausted all tests and are left with unexplained infertility. We trying a second round of IUI this month. If unsuccessful again, we will move on to IVF. We both very much want to be parents so this has been disappointing and stressful. I hope to deliver some good news in this area in my year 9 post.
I continue to read these boards often. Thank you to everyone here who shares their knowledge! On to the finances...
Links for those interested in seeing my journey and previous posts.
Year 1 (2013): viewtopic.php?f=1&t=127906&p=1878374
Year 2 (2014): viewtopic.php?f=1&t=153385&p=2301523
Year 3 (2015): viewtopic.php?f=1&t=182856&p=2773872
Year 4 (2016): viewtopic.php?f=1&t=209175&p=3210565
Year 5 (2017): viewtopic.php?f=1&t=240324&p=3761539
Year 6 (2018): viewtopic.php?f=1&t=277360&p=4470629
Year 7 (2019): viewtopic.php?f=1&t=301745&p=4979577
Year 8 (2020): Below
I am carrying forward the balance progressions from previous years posts so you do not have to click through all the threads tough they are entertaining, in my opinion, especially year one.
I format all accounts below as '13 ($) -> '14 ($) -> '15 ($) -> '16 ($) -> '17 ($) -> '18 ($) -> '19 ($) -> '20 ($)
Year 8 (2020)
Emergency Fund (EF): Funded (see savings below)
Debt: No credit card debit, car loans or mortgage
Student Loans: $76,491 -> $68,972 -> $45,376 -> $27,262 -> $0
Tax Filing Status: Married with no dependents
Marginal Tax Rates: 32% Federal, 9.3% State
State of Residence: CA (LA area)
Age: 34 (Married)
Desired Asset Allocation: 90% stocks / 10% bonds
Desired International allocation: 25% of stocks
Term Life Insurance: Him $4M, Her $2M - I know this more then some here would suggest. I felt these amounts made sense because great rates at our age, income continuing to rise, and our current plan to raise kids in a HCOL area.
Income: I am going to share my salary numbers for the first time. This is to help with my questions at the end.
Job Date Year Salary (Him + Her)
Job 1 3/11/13 Year 0 $50,000
Job 2 11/4/13 Year 0.7 $70,012
Job 2 10/1/14 Year 1.6 $88,181
Job 3 4/22/15 Year 2.1 $126,500
Job 3 4/1/16 Year 3.1 $149,443
Job 4 6/10/17 Year 4.3 $222,000
Job 4 1/1/19 Year 5.8 $227,550
Job 4 9/15/19 Year 6.5 $250,350
Job 4+1 1/1/20 Year 6.8 $256,884 + ~$50,000 = $306,884
Job 4+1 1/1/21 Year 7.8 $272,697 + ~$80,000 = $352,697
2020 Planned Retirement Contributions: $58,200
$19,500 His 401k
$19,500 Her 457(b) (4% match)
$6,000 His ROTH IRA
$6,000 Her ROTH IRA
$7,200 Family HSA ($500 by employer)
Retirement Accounts: $11k -> $46k -> $78k -> $127k -> $203k -> $218k -> $318k -> $437k
90% stocks (25% International) and 10% bonds using low cost index funds.
- His 401k (Fidelity): $0 -> $22k -> $32k -> $64k -> $110k -> $118k -> $175k -> $239k
- His ROTH IRA (Vanguard): $5.5k -> $12k -> $21k -> $28k -> $37k -> $39k -> $56k -> $80k
- Her ROTH IRA (Vanguard): $5.5k -> $11k -> $21k -> $28k -> $40k -> $42k -> $59k -> $84k
- Family HSA (Fidelity): $0 -> $0 -> $3.6k -> $7.6k -> $16k -> $20k -> $28k -> $34k
100% Medium Term CA Tax Exempt Bonds @ Vanguard. Represents all savings past retirement accounts each year. Last years post I talked about getting this to $250k for a downpayment on a house. This is the cross-roads we arrive at for this years post.
Crypto (fun money - started with $4k): $0 -> $0 -> $0 -> $0 -> $3k -> $16k -> $5k -> $40k
Expect to get to $450k - $500k in savings by EOY based on last years savings rate.
Homes in forever home areas of LA for us are $1.25M - $1.5M (maybe a little more).
Starter condo/townhouse in temporary areas of LA are $700K - $900K.
We rent a 1br, 1ba for $1,700. If kid #1 comes we will need a 2br minimum - rent budget of ~$3,500.
I thought we would be buying this year but homes are too expensive and there is no rush. We could rent another 6+ years until kid 1, who we hope to have this year, is ready to start school. If we are looking at 6+ years from a home purchase then having all our savings in bonds seems overly conservative. If home prices drop maybe we are looking at home purchase in <6 years.
What would you do?
1. Buy a starter condo/townhouse with a budget of $X and $200k-$250k down. What would $X be given our income and savings rates? Maybe $800K?
2. Rent 1br as long as possible and then move to renting 2br as long as possible. Keep saving and evaluate each year moving forward. Accept buying a home is realistically still 6+ years away.
3. If #2 over #1, what do I do with $295k in savings all sitting in bonds? If we assume a home purchase is unlikely in next ~6 years, I am thinking of investing it 50/50. Then, throughout 2021 dollar cost average each months additional savings into stocks until account is 75/25. Maintain 75/25 until balance can support a home purchase. I know conventional advice here is bonds for short term uses like a down payment. But if we are looking at deferring home for 6+ years, worst case stocks perform poorly over next 6 years while we keep saving and we have to wait a little longer to buy house. Best case stocks do well while we keep saving and we can buy house a little bit sooner.
We are so fortunate to be in this spot. But with it comes with a decision I am finding myself somewhat conflicted on. I am leaning towards DCA from 50/50 up to 75/25 and just keep living and waiting for now.
Thank you again to this community. I'll be back again next year!