Life Situation: Hi, we're 25 & 30 years old, living together in Northern Colorado with two pups and a cat. We both file as single with no dependents. We’re not in a rush to get married and are unsure about having kids. We work for the same organization which is a 1/2 mile from home (Glorious!). We've been following MMM for about 9 months now and are starting to get serious about our early retirement goals. We’re debt free (yay!) and would love to be retired in 10 years, but we’re still learning how to project our FI date with any confidence. In general, we're happy with where our expenses are but would like advice on investments and how to separate our money into all the buckets we have available to us. Thank you for your time and advice!
Gross Monthly Salaries:
-Earner 1: $3,956.33 ($47,476 annually) – There are good opportunities for growth in this position. I'm at the bottom of my salary range. Love the commute and relatively low stress.
-Earner 2: $3,797.42 ($45,569 annually) – Not much opportunity for growth, looking at standard 3% increases annually. I like the job and love the commute and low stress.
-Total: $7,753.75 ($93,045.00 annually)
Monthly Paycheck Deductions:
-401ks: $3,000.00 – We both max our 401ks (Employer matches 7% each)
-HSAs: $566.67 – Employer contributes $700 each. We contribute the difference to max annually.
-457s: $800.00 – We only began taking advantage of this in May 2017. We're starting with $400 each per month…still fiddling with this number, but we're getting close to the edge of our saving limit/cash flow. (Or so we think).
Total: $4,366.67
Monthly Taxes: $746.00 – Tips for how to de-mystify tax calculations? To get this estimate I did a paycheck calculator with all our deductions (including $200 each into 457 which hasn't officially started yet). Then I multiplied that number by 26 pay periods and divided by 12 to get the monthly estimate. *shrug*
Net Take Home Pay: $2,641.08
Average Monthly Expenses:
-Mortgage (Principle and Interest): $557.00
-Mortgage (Taxes and Insurance): $208.00
-Necessary: $966.00 - Groceries are around $300. The other large pieces have been pet-related or car maintenance. The car average should be decreasing since we’re down to one car.
-Discretionary: $583.00 – Largely home improvements but we’ve cooled it on this recently.
-Total: $2,314.00
2017 Additional Income (So Far):
-Truck 1: $5,500.00
-Truck 2: $13,000.00 – #OneCarFamily
-Craigslist: $615.00 – We've had fun downsizing and finding random things to sell around the house
-Etsy: $0.00 – Currently stalled on our Etsy shop, but wanting to prepare it for 2017 holidays.
Total: $19,115.00
Investments/Cash:
-401ks: $52,254.00 – We’re invested in small and large cap index funds with an ER of .6% *
-HSAs: $5,976.00 – Best investment option has ER of .4% * with a $2.50 monthly admin fee
-457s: $0.00 – Will start this month. Best investment option has a 1% ER *
-Roth IRA: $11,791.00 – VTSAX (We both max IRAs each year. Alternating Roth and traditional)
-tIRAs: $33,901.00 – VTSAX
-Taxable: $7,050.00 – VTSMX, this was funded in part with first truck sale. (Emergency fund).
-Checking/Savings Accounts: $23,245.00 - Just sold truck #2. We’re deciding how to strategize with this extra cash. Typically we keep enough in checking to cover our bills and a little emergency.
-Total: $134,217.00
* Note on expense ratios: We work for a small organization so the fees tend to be higher than what one might get elsewhere. I’m on the review team for our benefits and have been working with Human Resources to explore better options.
House:
-Zestimate: $248,574.00 (Purchased the house in 2010 for $142,500. Front Range, CO markets are hot.)
-Outstanding Mortgage: $106,737.00 – (4.25% interest)
Equity: $141,837.00
Net Worth: $276,054.00
Specific Questions:
1. We recently sold our 4x4 Frontier for 13k and would love advice about where to put this money. We’re thinking of either investing in taxable VTSAX or living off this cash while we funnel more money into our 457s. We like the taxable option because the money is more accessible than in the 457 where it would be tied-up until separation of employment. We also understand the tax benefits of the 457, especially since we're both young.
2. We've been experimenting with the amount we can comfortably pump into pre-tax accounts. We're still not sure how to predict our tax bill at the end of the year though. We’d like this to be less of a surprise/guessing game. Are there strategies you can provide for how to calculate end of year taxes? Even paycheck taxes are confusing to us...#newbs
3. I mentioned above that our expense ratios aren’t great, but we’re hoping that might improve. In the meantime, how much weight should we put on a 1% expense ratio? Should that impact where/how we save?
4. At what point will we be in “danger” of saving too much in 401k/IRAs, or “old people money”. Should we reverse and max 457 before 401k (keeping match), even though the 457 has a higher expense ratio?
Thank you for reading!!
