Firstly, I know I am in a very fortunate position right now financially. There are people out there (and on this forum) in vastly different and difficult circumstances. So this is not a sob story, just my personal situation that I am looking for guidance with.
Topic Title: What more should I do/do I need to do?
Life Situation: Married filing jointly (both late 30’s), 1 dependent (1 yr). Live in Georgia, USA. I am an expat immigrant from the UK. Been here 7 years, don’t expect full social security for myself, my wife should though. I am a chemist, she is an ICU nurse.
New to FIRE and only just took the plunge with going for a HSA (this year). Maxing it out and paying out of pocket for health expenses. Refinanced mortgage (see below) to allow us to max out Roth IRAs.
Want to retire early (obviously). Aiming for 15 years time.
Gross Salary/Wages: $170,000 + bonus but not guaranteed
Individual amounts of each Pre-tax deductionsMy 401k (16%): 19,200 50:50 spilt between Roth 401K and Trad 401k
Employer match (4 %): 4,800 (trad 401k)
Employer Pension Plan (8 %): 9,600
HSA: $7,100 incl. $1,300 employer contribution
Dependent care FSA: $5,000
Roth IRA: $6,000 each p/a
Her 401K (12%): $6,000
Employer match (4%): $2,000
Taxes: 22% marginal rate federal, 5.75% marginal rate state.
Take Home Salary/Wages: $120,000
Current expenses:We do spend quite a bit, but that is the lifestyle we want to have (expecting abuse here…). Obviously later on in life some expenses will go away (mortgage, roth IRA contributions etc.). W
We make most food from scratch, but do prefer organic so spend more here (kroger is our store). We enjoy going out for food and drinks (once per week). After all, we should enjoy life now as well as plan for retirement.
We are contributing to a 529 plan and an UGMA for our child ($400 a month).
We save $200 every 2 weeks towards vacations and car replacement - these are known future expenses (flying back to the UK is expensive), so that is how we manage them. They go into a 90% stock account at Betterment.
Childcare (when COVID-19 stabilizes) around $580 p/m (30 hours).
Assets:2 x Cars (ford focus, honda CRV) - we have two different jobs. In theory she could cycle to hers, but it is dark half the year when she goes and leaves. She is too nervous and tired. I could cycle and have done so when I moved here with no other means of transportation, but it is 12 miles of death trap by tractor trailers (backroads full of warehouses).
Emergency fund (with betterment at 85% Bonds): $33,000 - this is truely for emergencies. Replacing a car/hvac etc. is a predictable expense - it will happen! Once we retire we won’t need an emergency fund.
Roth IRAs: ~ $12,000 (Betterment)
Roth 401K: ~ $97,000
Trad 401K: ~ $152,000
Pension: ~ $70,000
HSA: ~ $4,000
House: ~$240,000-$290,000 market value (we do have a mortgage)
Liabilities:Wife’s student loans: ~ $10,000. Monthly payment of $175 + Employer $150 contribution. Rate currently 0% but will go up (congress dependent) in November back to approx 3.2 %
Mortgage: ~ $220,000. Just refinanced to 2.00% (15 year). Previous was a 10/1 ARM at 3.25 %. Would have been due a rate hike in 2026. Was over paying and had aimed to pay off (rate hike dependent by 2029. Added 5 years to that now, but can now pay minimum and put difference into Roth IRAs etc. without fear of the dreaded rate hike. Looking at P&I of $1,433 p/m. Taxes and insurance paid out of pocket (no escrow) around $4000 p/a (i think that is low but it is the estimate on my closing statement).
Credit cards: Rolling credit cards, paid in full each month. One CC with $13,000 on it for a new HVAC. 0% interest to mid 2021. Looking to pay off in full at that point. Will likely have regular such expenses, e,g, 2nd HVAC system, house repainting, roof repair etc. (the joy of home ownership).
Car Loan (Ford): $2,000 at 2%
Specific Question(s):Looking at my monthly expenses and budget numbers, we bring in approx 10K each month and do spend most of that, but some of that is savings. I know the target is 60% savings. Is that 60% of take home? Can I count pre take home contributions to savings? How far off are we?
Annual 401K and Pension totals (ourselves and employers) = $41,600
Annual HSA = $7,100
Roth IRAs = $12,000
So we are at around $60,000 p/a for retirement already, so 50% of take home. Is that right? Is 15 years too conservative/optimistic? What more can we do or need to do?
With respect to expenses, my wife isn’t quite onboard with cutting down all frivolous expenses, and I don’t think that will change.
It is important psychologically for my wife to see a reasonable paycheck every two weeks, so we have not maxed out her 401K. She works incredibly hard as a nurse with COVID patients. I’m not going to make her paycheck be basically $600.
Thanks for any guidance.
EDIT 8/1/2020 - I've added my monthly average expenses for YTD. Now expecting the abuse!
Car Insurance | $167.06 | Includes umbrella insurance - tried shopping around, but not found one yet that brings cost down significantly (discounted with home owners coverage too). Will be cheaper for the next 6 months |
Car Payment | $427.29 | Paid off on car in feb, expect 2nd car to be paid off in feb 2021 |
Car Repair / Licenses | $92.78 | |
Car Replacement Fund | $171.43 | A new car will be needed at somepoint. |
Child Care | $527.00 | Using an FSA, expect 590 per month when back to daycare post covid |
Clothing | $82.16 | |
Debt | $166.60 | Student loans - currentl 0% but still paying off right now |
Doctor / Dentist | $197.79 | Not using HSA savings |
Fuel | $45.90 | |
Groceries | $847.18 | Seems high. Was lower before Mach, but our dining expenses were higher then |
Health Insurance | $0.00 | |
Home Insurance | $0.00 | WIll be 180 p/m from september |
Home Supplies | $239.90 | Been uprade various home needs (electircal etc.) |
Life Insurance | $154.29 | Expecting a $90 average p/m for the two of us over 12 months |
Medicine | $86.35 | Not using HSA savings |
Miscellaneous | $88.59 | |
Mortgage / Rent | $1,898.11 | Will be down to $1433 p/m |
Home Maintnance | $29.28 | |
Pet expenses | $216.65 | Have pet insurance at around $33 per pay period. Pet food around $50 p/m, pet insurance keeping other costs down |
Property Tax | $287.53 | half way through the year, likely $340 p/m |
Other_5 | $103.57 | One off, I just applied for US citizenship at a cost of $725 |
Personal Care | $32.22 | |
Retirement Fund | $1,428.57 | Ploughed $6000 into last year's ROTH in March (perfect timing so far), and now aiming to max out 2 x roth IRA's this year. |
Taxes | $121.43 | |
Util. Electricity | $114.01 | |
Util. Gas | $94.07 | |
Util. Phone(s) | $124.62 | Just switched to xfinity, expect to be down to $35 p/m for two phones. Had to pay off a financed phone |
Util. Water | $81.21 | |
Util. Alarm | $31.85 | Negotiated rate down from $45 to $30 p/m in January |
FInance Fees | $93.85 | |
- | $0.00 | |
Charity | $16.57 | |
Cleaning | $17.85 | Every now and again we need help with a cleaner. We are exhausted |
Dining | $323.34 | |
Discretionary | $1.19 | |
Fun / Entertainment | $56.50 | |
Furniture / Appliances | $72.57 | |
Gifts Given | $142.36 | American tradition of gifts for everything... We did very well out of our baby shower, can't really complain, although I think it is so wasteful culturally. |
Baby Education | $400.00 | |
Util. TV / Internet | $64.36 | COmcast ($40), netflix etc. |
Travel | $166.18 | parking, hotels, transit etc. Mainly a week vacation coming up |
Subscriptions/Dues | $33.13 | |
HSA | $362.96 | Transfer from HSA cash account to investments |
Vacation Fund | $171.43 | Savings for future travel |
Major Home | $1,866.97 | I think this needs to be ignored. Just spent 10K + on a new HVAC system |