Year 8 as a Boglehead: At an Interesting Crossroads, Need Help

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WhatsUpB
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Joined: Sun Aug 18, 2013 9:17 pm

Year 8 as a Boglehead: At an Interesting Crossroads, Need Help

Post by WhatsUpB »

In year 9 as a Boglehead and doing my 8th annual retrospective post. I hope it inspires and motivates at-least one member to take up managing their own finances guided by the Boglehead principles.

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
Taxable Account (Long Term Savings including EF): EF Only -> EF -> EF -> EF -> EF -> $51k -> $111k -> $295k
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

Questions

Other Details
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! :sharebeer
Last edited by WhatsUpB on Thu Jan 14, 2021 12:22 am, edited 2 times in total.
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geerhardusvos
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Re: Year 8 as a Boglehead: At an Interesting Crossroads, Need Help

Post by geerhardusvos »

Sorry to hear about the infertility, that is very disappointing and frustrating. Stay patient and positive and if it’s meant to be it will happen.

Seems like you are doing well and off to good start. I would recommend continuing to rent. I would not recommend buying a condo, just continue investing aggressively in your portfolio. Seems like you are far away from being able to afford a forever home in LA, which is understandable since most people can’t afford a home in LA. I think this aligns with your option number two. I would recommend never owning in that region, even long-term. We are young family as well and we live in a VHCOLA. We will rent here until we have accumulated enough for us to retire in an MCOLA. If I were in your shoes I would completely put buying a house out of my mind.

When considering house buying: Check this out for starters

It would be a good idea to stop contributing to your bonds, and if you have any bonds in your retirement accounts where there is no tax implications, maybe you adjust those to equities immediately to meet your desired asset allocation. Just make sure that you are around an 75/25 asset allocation or whatever you are comfortable with since you have a long way to go until retirement. I am in my early 30s and have 98/2. We have no debt, we rent, and we have about 15x our living expenses invested. Just be clear about what your goals are and stick to your plan. Don’t overthink the asset allocation, just pick something and stick with it. In my opinion you have too much bonds for your age and goals, but that’s for you to decide.

Just keep investing, focus on your learnings and earnings, and focus on your family and health.
VTSAX and chill
Topic Author
WhatsUpB
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Joined: Sun Aug 18, 2013 9:17 pm

Re: Year 8 as a Boglehead: At an Interesting Crossroads, Need Help

Post by WhatsUpB »

Thank you for the response. I agree it is too much in bonds. Up until this year I thought a $250k-300k down payment would be enough to buy in SoCal so I looked at the money as short term savings so bonds only and not part of my retirement asset allocation.

If I put buying out of my mind, it seems like my plan to get to 75/25 in taxable makes the most sense per your comments and go from there. My retirement accounts are 90/10 in aggregate given another ~30 years before being touched. I likely will touch taxable sooner, maybe we buy in 7-10 years?

Current plan: Rebalance my taxable to 50/50 this week, use savings each month throughout this year to get to 75/25. Once 75/25 is reached, determine if I am comfortable pushing my taxable further to 90/10. Either way keep renting and saving...
FIREmeup
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Re: Year 8 as a Boglehead: At an Interesting Crossroads, Need Help

Post by FIREmeup »

Congrats on the financial progress...you are doing great and probably could be giving others suggestions. I do agree with the previous poster with easy on the bonds...you are young... and have many years have good earnings ahead.

I wanted to reply due to your infertility struggles. My wife and I were like you a 5 years ago. We were fit healthy and definitely put off having kids assuming wed have no problem getting pregnant when we decided. Well, a year went by, another 6 months under direction of her gyno. Finally went to infertility clinic for all the tests and ended up with unexplained infertility. Which was a relief and also not so as I am sure you felt. It was another brutal 6 IUIs before we received the good news and had a baby. As soon as we my wife was cleared again we didn't mess around and started IUI month 1 again and was successful pretty quickly that time.

Don't lose hope. I know so many around me that had to go down this path...and even further on to IVF. I know my friends and myself wrongfully felt shame and our little secrets were only revealed when we bumped into each other at the clinic.

Financially you don't have to worry. I wouldn't add the stress of a new home right now. I know how tough it was on myself going through infertility, and infinitely more tough on my wife. So support each other. Science is amazing these days. Good luck to you two.
Topic Author
WhatsUpB
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Joined: Sun Aug 18, 2013 9:17 pm

Re: Year 8 as a Boglehead: At an Interesting Crossroads, Need Help

Post by WhatsUpB »

Thank you for the kind words! My wife has been amazing through it all. Attempt number 2 coming up this month.

I put the buy order in for $175k in stocks today. Starting out ~60/40 and going to keep buying stocks up for the rest of the year to increase the stock percentage per plan above.
dru808
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Re: Year 8 as a Boglehead: At an Interesting Crossroads, Need Help

Post by dru808 »

Great job, the boglehead philosophy has served you well.
..........
Ferdinand2014
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Re: Year 8 as a Boglehead: At an Interesting Crossroads, Need Help

Post by Ferdinand2014 »

Adoption is a wonderful blessing. 2 of my 3 children are adopted. Of course such decisions are a deeply personal one. It has been an amazing and blessed journey for our family. Good luck on your financial and personal journey. You are certainly way ahead of where I was at your age.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett
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Re: Year 8 as a Boglehead: At an Interesting Crossroads, Need Help

Post by abuss368 »

dru808 wrote: Mon Jan 11, 2021 8:52 pm Great job, the boglehead philosophy has served you well.
Could not agree more! Great job.

Tony
John C. Bogle: “Simplicity is the master key to financial success."
Savvy
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Re: Year 8 as a Boglehead: At an Interesting Crossroads, Need Help

Post by Savvy »

Sent a DM.
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sergeant
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Re: Year 8 as a Boglehead: At an Interesting Crossroads, Need Help

Post by sergeant »

Thanks for the update. Nice progression of salary and assets. Good luck with the fertility issues. A cousin had similar circumstances and struggled for several years but she now has a beautiful baby boy.

I like your idea in regards to having a balanced portfolio for the home purchase. We have one of those expensive LA area homes. We bought it 25 years ago and it is paid off. We have been looking to relocate to the Central Coast and our taxable accounts at Vanguard are the designated home buying assets. We are about 50/50, VFIAX/VFIJX. We are near 7 figures, the returns and monthly contributions have more than kept up with real estate price increases. I keep thinking prices will drop and have been wrong for years.
AA- 20+ Years of Expenses Fixed Income/The remainder in Equities.
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