Topic Title: Case study – what’s your opinion on next steps for investing/efficient money & tax placement and if I’m missing opportunities?
Life Situation: Married, filing joint, 2 children of age 11 and 8. Reside in Texas. Current age 41 & 40. Desiring to retire from main career at 52-54, semi-interested in P/T work learning a trade. Spouse is in similar mindset, possibly leave career earlier to pursue different P/T work & more family time.
Gross Salary/Wages: 16,900/monthly
Individual amounts of each Pre-tax deductions 401k, HSA, FSA, IRA, insurance, etc.:
Medical plans - $286/mo
Dental - $17/mo
Vision – $1.42/mo
401k – $1541.67/mo (maxed over course of year)
403b – 1541.67/mo (maxed over course of year)
HSA individual through work - $2.17/mo
Supplemental life ins through work - $35.53
FSA dependent care - $416.66/mo ($5000 per year)
Total: $3842.13Other Ordinary Income: Yearly bonus of 22% on one wage = gross $2016/month
Qualified Dividends & Long Term Capital Gains: n/a
Rental Income, Actual Expenses, and Depreciation: n/a
Taxes: Fed withholding - $1592/mo
FICA - $1245/mo
No state tax.
Property tax – $633/mo
Total: $3470Current expenses:Childcare - $803/mo
Gyms - $154/mo
Internet - $72/mo (Last I checked, there are only two 'net providers to our 'hood, I'll need to check on that again)
Streaming (Netflix, YTTV) - ~$51
Cellphones - $123/mo -> $90/mo shortly (been researching other local options, local reviews of other services are discouraging)
HOA - $49.50/mo
Mortgage - $771/mo
Groceries/household supplies - $860/mo
Gas/tolls - $380/mo
Utilities - $322/mo
Medical - $100/mo
Auto Maintenance - $133/mo
Home maintenance - $83/mo
Clothing - $120/mo (need to study this one further)
Kids’ sports/lessons - $160/mo
Spouse/girls’ hair/hygiene - $175/mo (Spousal disagreement ongoing)
School supplies - $14/mo
Pets - $9/mo
Gifts year - $295/mo
Auto/life/home insurances - $309/mo
Yearly subscriptions - $48/mo
Vanguard investment - $1000/mo
529 plans - $625/mo
Travel/vacation fund - $500/mo
Home remodel fund - $600-$1000/mo
Special vacation fund - $70/mo
New cellphones fund - $33/mo
Dining out/entertainment - $275/mo
Babysitter - $50/mo
Hobby - $500/mo
Fun money - $150/mo
Total: $8832-9232Expenses estimated in a couple years:$8000-$8400/mo
Expenses estimated >2-3 years:$7000-7500
Expenses estimated at retirement: (studying to reduce further)$6250/mo
Assets: Vanguard taxable brokerage - $6100 (currently all VTSMX)
Roth IRA spouse - $20k (US stock 83%, US bond 12%, other 3%)
Roth IRA - $27k (US stock 73%, US bond 12%, REIT 12%, other 3%)
Rollover IRA - $235k (US stock 59%, US bond 12%, intl stock 20%, REIT 7%, other 2%)
401k – $148k (US stock 50%, intl stock 28%, US bond 19%, other 3%)
403b - $207k (US stock 56%, Intl stock 24%, US bond 8%, intl bond 1%, REIT 8%, other 3%)
403b match - $46k (same as above)
529 plans – $16,300
Cash emerg fund - $20, 500
Cash funds/bills - $31,000
Overall allocations: US stock 58%, Intl stock 21%, US bond 11%, Intl bond 1%, alternatives 6%, cash 3%
Total: $756kLiabilities:
Mortgage principal - $144k. Original amount $168k at 3.875%, 21 years remaining IIRC.
Credit cards – actively used, but no debt + paid off monthly in full + all spending tracked & backed by cash. Balance is ~$5k.Specific Question(s): September 2017, we had CC debt, a car payment, a replacement wedding ring payment, and were basically paying bills from check to check. Got sick of that, changed spending/expenses and mindset, got everything paid off. Started saving more, planning more, and investing. Teaching the kids about investing, opened UGMA accounts at VG that they are contributing to…..
Been doing a lot of reading, but looking to learn more and optimize better still. No, not mustachian yet, more like YNABian currently.
Not interested in real estate investing at this time.
Financial order plans: Saving for home remodel. Then used vehicle replacement in ~2-3 years + 20yr anniversary vacation. Help/teach the kids to fund their VG accounts.
Currently maxing 401k/403b and then investing in Vanguard taxable brokerage (total stock market index fund) and the 529 plans monthly.
- Not contributing to Roth IRA due to income level, not contributing to rollover IRA (from a job change 10 years ago) since it isn’t deductible, and have not done backdoor Roth with the rollover IRA due to concern about tax implication since the balance has been building up for so long. When it was rolled over from the job change, it was ~$80k as I recall it. Am I looking at that correctly?
- Was thinking that directing investment money into taxable brokerage (index funds) at VG would allow for flexibility to access income as needed before age59. Is that reasonable?
- As the VG brokerage funds build up, I’d reallocate the IRA and 401k/403b accounts to gradually increase the bond and REIT holdings for tax efficiency. Yes/no?
- I realize that cutting more expenses would free up considerably more. We’re working on that as a family, i.e. what we value, travel, etc. Suggestions?
- Do you see other opportunities I’m missing?
Further edits:Rollover IRA is being rolled into 401k. Opening up T-IRA for backdoor Roth for Spouse1.
Opening up T-IRA for backdoor Roth for Spouse2.
HSA is being maxed by Spouse2.
Spouse2 does not have 457 plan available.
Spouse1 401k does not permit after-tax contributions.
Bargaining with gym for reduced rate.
Bargaining with 'net provider for rate reduction.
Reduced grocery/household fund and monitor.
Reduced clothing fund.
Reduced gifts/holidays fund.