Finances feedback before changing jobs

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
dts_12
Posts: 42
Joined: Mon Feb 03, 2020 5:34 pm

Finances feedback before changing jobs

Post by dts_12 »

I am starting a new job in few weeks and wanted to get some opinions as its a good time to make tweaks. I've been working towards a two fund portfolio. We have two kids ages 2.5 years old and 3 months old.

Emergency funds: Yes, All in high yield savings

Debt:
Mortgage $570k @ 3.335% (was a construction loan that recently converted to a 30 year fixed)
Auto $25k @ 0%
Furniture Loan $2.2k @ 0%

Tax Filing Status: Married Filing Jointly

Tax Rate: 24% Federal, 7.85% State

State of Residence: MN

Age: Him 33, Her 31

Desired Asset allocation: 90% stocks / 10% bonds
Desired International allocation: TBD

Current retirement assets: $230,000


Taxable at Fidelity
0.12% Vanguard Total Stock Market ETF (VTI) (0.03%)

His 401k at Vanguard
2.77% BlackRock Total Return Fund Class K Shares (MPHQX) (0.37%)
5.09% Vanguard Total Bond Market Index Fund Institutional Shares Inst (VBTIX) (0.04%)
72.95% Vanguard Institutional Index Fund Institutional Shares Inst (VINIX) (0.04%)

Company match? Yes, contribution not match 7.5% (new job will be 6% with potential for more with promotions)

His Roth IRA at Fidelity
3.94% Vanguard Total Stock Market ETF (VTI) (0.03%)
1.28% Sixth Street Specialty Lending, Inc. (TSLX) (Business Development Company, can't bring myself to sell because my yield on cost has been like 16%)

Her 401k at American Funds
1.59% American Funds 2050 Target Date Retirement Fund® Class R-6 Retirement (RFITX) (0.39%)

Company Match? Yes 2%

Her SEP IRA at American Funds
2.75% American Funds 2050 Target Date Retirement Fund® Class A A (AALTX) (0.72%)
Company match? No

Her Roth IRA at Fidelity
0.4% Fidelity® Blue Chip Growth Fund No Load (FBGRX) (0.79%)
0.56% Fidelity® 500 Index Fund (FXAIX) (0.02%)
1.28% Fidelity® ZERO Total Market Index Fund (FZROX) (0.00%)
0.29% Fidelity® U.S. Bond Index Fund Inst (FXNAX) (0.03%)
0.13% Microsoft (MSFT)

Kid 1 529 @ Fidelity
6.24% Target Date Fund

Kid 2 529 @ Fidelity
0.57% Target Date Fund
_______________________________________________________________

Current allocation is 90.1%/9.9%

Contributions

New annual Contributions
$11,440 his 401k (also $10,725 employer contribution) (will increase this with pay bump from new job)
$3,450 her 401k (also $2760 employer contribution)
$600 Each 529

Other :
House Value ~$785k
2nd Car Paid off
Daycare is expensive
All of both undergrads and her grad school is paid off

Questions:
1. My new job is coming with a substantial raise, access to an HSA, and bonus potential up to 20% of base. I plan to use the raise to increase my 401k contribution to the maximum and use some of it to pay for the increased day care when #2 starts. What should I do from there?

2. I always assumed my tax rate would be higher later in life so went heavy on Roth, but now that my income is too high for Roth IRA contributions should I be doing a traditional 401k when I switch companies? Also my current Roth 401k has employer contributions so I'm open to advice on splitting that out as part of a rollover if anyone has experience.

3. What else should we be doing?
_______________________________________________________________
Action Plans Thus Far:
1. Increase my 401k contribution to the maximum
2. Finish cleaning up my wife's IRA down to FZROX
3. Choose traditional 401k for my new employer
4. Refinance the mortgage
Last edited by dts_12 on Tue Sep 14, 2021 4:03 pm, edited 1 time in total.
Doohop65
Posts: 108
Joined: Wed Feb 04, 2015 11:54 am

Re: Finances feedback before changing jobs

Post by Doohop65 »

Refinance that mortgage rate ASAP. I recently locked a 15 year but when I spoke to the mortgage broker he quoted a 30 year at 2.125 with about 2k in closing costs.

Make sure you have a lot of life insurance with the amount of debt you carry and little ones. We both carry enough to make sure the other is covered in the case of death to a spouse.

I would simplify her Roth and get the bonds out of their.

Finally, build up that taxable and keep it simple. A lot of folks like to make things complicated but I prefer simple. I use only a few funds in each savings vehicle and it makes my life easy.
Trader Joe
Posts: 2593
Joined: Fri Apr 25, 2014 6:38 pm

Re: Finances feedback before changing jobs

Post by Trader Joe »

dts_12 wrote: Mon Sep 13, 2021 10:24 pm I am starting a new job in few weeks and wanted to get some opinions as its a good time to make tweaks. I've been working towards a two fund portfolio. We have two kids ages 2.5 years old and 3 months old.

Emergency funds: Yes, All in high yield savings

Debt:
Mortgage $570k @ 3.335% (was a construction loan that recently converted to a 30 year fixed)
Auto $25k @ 0%
Furniture Loan $2.2k @ 0%

Tax Filing Status: Married Filing Jointly

Tax Rate: 24% Federal, 7.85% State

State of Residence: MN

Age: Him 33, Her 31

Desired Asset allocation: 90% stocks / 10% bonds
Desired International allocation: TBD

Current retirement assets: $230,000


Taxable at Fidelity
0.12% Vanguard Total Stock Market ETF (VTI) (0.03%)

His 401k at Vanguard
2.77% BlackRock Total Return Fund Class K Shares (MPHQX) (0.37%)
5.09% Vanguard Total Bond Market Index Fund Institutional Shares Inst (VBTIX) (0.04%)
72.95% Vanguard Institutional Index Fund Institutional Shares Inst (VINIX) (0.04%)

Company match? Yes, contribution not match 7.5% (new job will be 6% with potential for more with promotions)

His Roth IRA at Fidelity
3.94% Vanguard Total Stock Market ETF (VTI) (0.03%)
1.28% Sixth Street Specialty Lending, Inc. (TSLX) (Business Development Company, can't bring myself to sell because my yield on cost has been like 16%)

Her 401k at American Funds
1.59% American Funds 2050 Target Date Retirement Fund® Class R-6 Retirement (RFITX) (0.39%)

Company Match? Yes 2%

Her SEP IRA at American Funds
2.75% American Funds 2050 Target Date Retirement Fund® Class A A (AALTX) (0.72%)
Company match? No

Her Roth IRA at Fidelity
0.4% Fidelity® Blue Chip Growth Fund No Load (FBGRX) (0.79%)
0.56% Fidelity® 500 Index Fund (FXAIX) (0.02%)
1.28% Fidelity® ZERO Total Market Index Fund (FZROX) (0.00%)
0.29% Fidelity® U.S. Bond Index Fund Inst (FXNAX) (0.03%)
0.13% Microsoft (MSFT)

Kid 1 529 @ Fidelity
6.24% Target Date Fund

Kid 2 529 @ Fidelity
0.57% Target Date Fund
_______________________________________________________________

Current allocation is 90.1%/9.9%

Contributions

New annual Contributions
$11,440 his 401k (also $10,725 employer contribution) (will increase this with pay bump from new job)
$3,450 her 401k (also $2760 employer contribution)
$600 Each 529

Other :
House Value ~$785k
2nd Car Paid off
Daycare is expensive
All of both undergrads and her grad school is paid off

Questions:
1. My new job is coming with a substantial raise, access to an HSA, and bonus potential up to 20% of base. I plan to use the raise to increase my 401k contribution to the maximum and use some of it to pay for the increased day care when #2 starts. What should I do from there?

2. I always assumed my tax rate would be higher later in life so went heavy on Roth, but now that my income is too high for Roth IRA contributions should I be doing a traditional 401k when I switch companies? Also my current Roth 401k has employer contributions so I'm open to advice on splitting that out as part of a rollover if anyone has experience.

3. What else should we be doing?


Get out of debt asap and then live your life debt free.

You are in debt up to your eyeballs.
HomeStretch
Posts: 6858
Joined: Thu Dec 27, 2018 3:06 pm

Re: Finances feedback before changing jobs

Post by HomeStretch »

dts_12 wrote: Mon Sep 13, 2021 10:24 pm 1. My new job is coming with a substantial raise, access to an HSA, and bonus potential up to 20% of base. I plan to use the raise to increase my 401k contribution to the maximum and use some of it to pay for the increased day care when #2 starts. What should I do from there?
1. Consider paying off the furniture loan of $2.2k and the auto loan $25k.

2. Increase spouse’s 401k contributions.

3. Make Roth IRA contributions for you and spouse. If your income is too high, do a backdoor Roth for you and, if spouse can rollover the SEP-IRA balance into the 401k, for spouse.

4. Refinance your mortgage to lower the 3.335% rate.
tashnewbie
Posts: 1921
Joined: Thu Apr 23, 2020 12:44 pm

Re: Finances feedback before changing jobs

Post by tashnewbie »

HomeStretch wrote: Tue Sep 14, 2021 12:17 am
dts_12 wrote: Mon Sep 13, 2021 10:24 pm 1. My new job is coming with a substantial raise, access to an HSA, and bonus potential up to 20% of base. I plan to use the raise to increase my 401k contribution to the maximum and use some of it to pay for the increased day care when #2 starts. What should I do from there?
1. Consider paying off the furniture loan of $2.2k and the auto loan $25k.

2. Increase spouse’s 401k contributions.

3. Make Roth IRA contributions for you and spouse. If your income is too high, do a backdoor Roth for you and, if spouse can rollover the SEP-IRA balance into the 401k, for spouse.

4. Refinance your mortgage to lower the 3.335% rate.
+1.

I'd get rid of the furniture loan because it's small, and I'd want to be finished paying it. One less thing to think about (even if it's on autopay).

If you can't afford to max both spouse's workplace plans (1 each), then I would aim for more parity in the contributions between each (unless her plan doesn't offer any options with expense ratios less than 0.30%).

If you're in the 24% federal marginal bracket, I would do all traditional 401k contributions for now.

I think you could stand to simplify the portfolio some by reducing unnecessary redundancy and higher expense funds. This is an option:
dts_12 wrote: Mon Sep 13, 2021 10:24 pm Taxable at Fidelity
0.12% Vanguard Total Stock Market ETF (VTI) (0.03%)

His 401k at Vanguard
2.77% BlackRock Total Return Fund Class K Shares (MPHQX) (0.37%)
5.09% Vanguard Total Bond Market Index Fund Institutional Shares Inst (VBTIX) (0.04%)
72.95% Vanguard Institutional Index Fund Institutional Shares Inst (VINIX) (0.04%)

His Roth IRA at Fidelity
3.94% Vanguard Total Stock Market ETF (VTI) (0.03%)
1.28% Sixth Street Specialty Lending, Inc. (TSLX) (Business Development Company, can't bring myself to sell because my yield on cost has been like 16%)
Keep it if you must, but at ~1% of your overall portfolio, it's not moving the needle much either way.

Her 401k at American Funds
1.59% American Funds 2050 Target Date Retirement Fund® Class R-6 Retirement (RFITX) (0.39%)

Her SEP IRA at American Funds
2.75% American Funds 2050 Target Date Retirement Fund® Class A A (AALTX) (0.72%)

Are both of these accounts with her current employer? Are there any cheaper options? I would definitely want to change the fund choice in the SEP IRA.

Her Roth IRA at Fidelity
0.4% Fidelity® Blue Chip Growth Fund No Load (FBGRX) (0.79%)
0.56% Fidelity® 500 Index Fund (FXAIX) (0.02%)
1.28% Fidelity® ZERO Total Market Index Fund (FZROX) (0.00%)
0.29% Fidelity® U.S. Bond Index Fund Inst (FXNAX) (0.03%)
0.13% Microsoft (MSFT) You already get plenty of Microsoft in FZROX (and FXAIX), and this is such a miniscule portion of the portfolio. It's just clutter.
Topic Author
dts_12
Posts: 42
Joined: Mon Feb 03, 2020 5:34 pm

Re: Finances feedback before changing jobs

Post by dts_12 »

Trader Joe wrote: Mon Sep 13, 2021 11:55 pm
Get out of debt asap and then live your life debt free.

You are in debt up to your eyeballs.
I hear what you're saying, but really all I have is my mortgage that's charging any interest and we have over 25% equity. We had to get a bigger car with the second kid but we got 0%. I anticipate paying cash in the future for vehicles. Given we're still relatively young how would you prioritize paying down the mortgage early versus investing in taxable?
Topic Author
dts_12
Posts: 42
Joined: Mon Feb 03, 2020 5:34 pm

Re: Finances feedback before changing jobs

Post by dts_12 »

Doohop65 wrote: Mon Sep 13, 2021 11:05 pm
Make sure you have a lot of life insurance with the amount of debt you carry and little ones. We both carry enough to make sure the other is covered in the case of death to a spouse.
For sure - have a large policy that will take care of the mortgage and set them up for a while for exactly this reason and being the higher earner.
Topic Author
dts_12
Posts: 42
Joined: Mon Feb 03, 2020 5:34 pm

Re: Finances feedback before changing jobs

Post by dts_12 »

I'll edit the original posts but I think the take aways thus far outside of maxing my contribution are are:

1. Finish cleaning up my wife's IRA down to FZROX
2. Choose traditional 401k for my new employer
3. Refinance the mortgage
Topic Author
dts_12
Posts: 42
Joined: Mon Feb 03, 2020 5:34 pm

Re: Finances feedback before changing jobs

Post by dts_12 »

tashnewbie wrote: Tue Sep 14, 2021 8:16 am
HomeStretch wrote: Tue Sep 14, 2021 12:17 am
dts_12 wrote: Mon Sep 13, 2021 10:24 pm
Her SEP IRA at American Funds
2.75% American Funds 2050 Target Date Retirement Fund® Class A A (AALTX) (0.72%)

Are both of these accounts with her current employer? Are there any cheaper options? I would definitely want to change the fund choice in the SEP IRA.

Yes, her company finally crossed an aggregate threshold with American Funds to switch from the SEP IRA to a real 401k. When we asked about rolling it over they said there was some cool off period before we could. I should go back and see if that period has passed. Unfortunately the fund options are pretty poor.
tashnewbie
Posts: 1921
Joined: Thu Apr 23, 2020 12:44 pm

Re: Finances feedback before changing jobs

Post by tashnewbie »

dts_12 wrote: Tue Sep 14, 2021 4:02 pm Yes, her company finally crossed an aggregate threshold with American Funds to switch from the SEP IRA to a real 401k. When we asked about rolling it over they said there was some cool off period before we could. I should go back and see if that period has passed. Unfortunately the fund options are pretty poor.
Can you add her 401k fund options (including fund name, ticker symbol, and expense ratio) to the original post using the edit button (pencil icon in the top right corner of the post)? It's helpful to have all the information in one place.
Post Reply