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Thoughts on new budget/investment plan and what to do with old investments

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  • Thoughts on new budget/investment plan and what to do with old investments

    Hi all

    Sorry for yet another "What do you think of this?" thread, but after reading I thought it would be a good idea to put some numbers out there for critique/comments.  I’d like to start things off on autopilot for now, be savvy of where/how income is allocated, then re-assess after 6 mos or a year.

    Dual income household.  My sig other is in current practice, I will be starting shortly after recently completing fellowship.  We will be living in a HCOL area and renting for now (2/3br rent in the 3-4K range). I have ~350K in loans, sig other has none.  I will refinance this in the very near future.  We have our shared costs (i.e. rent, groceries, utils, etc.) but I will be tackling loans on my own.

    My goals: Pay off loans, have a rainy day fund (for now) of about 40K, fund retirement, save for a house, then other things like put extra aside for travel, etc.

    First off, I’m trying to estimate our taxes… using various simple online calculators (Married, no kids) it has us at about 35% going to taxes, and we are in a state with no income tax… is that a fair estimate?

    My salary is 300K so here is what I’ve got budgeted:

    Income after tax: 195K

    My yearly expenses, split with sig other (rent, insurance, utilities, automobile, etc): 40K (pretty generous)

    401K (Actually a federal FERS/TSP plan): 19K

    Backdoor: 6K

    Loans (target 5 year pay off): 70K

    Total: 135K

    Leftover: 60K

    Extra for retirement (net 20%): 15K

    Rainy day Fund (Goal 40K): 20K (can stop funding this and re-allocate to retirement and house savings)

    Save for a house: 20K

    Vacation and travel fund: 5K

    I figure once the rainy day fund is set and I have savings or investments elsewhere, that becomes less important.  Is there something else I am missing here?


    A few questions:

    Overall – thoughts? Is this reasonable? Should I be allocating more towards retirement?

    With any unforeseen income, where could I be putting that money?

    No kids now but likely in the future.  I can set aside funds towards them/college

    For the non 401K(TSP)/backdoor retirement funds (the extra initial 15K allotment), where would investing that make the most sense?  I do not have a HSA available through my employer (as far as I know)… can I obtain one on my own?  I don’t think we can contribute to a Roth outright as we filed jointly last year and would surpass the salary limit.


    Next - What to do with/maximize and/or simplify prior accounts, which include: 2x 401a from prior state employers, Roth IRA w/ Fidelity, fairly small amount in a 403b

    Lastly, is anyone familiar with the TSP plan to recommend any particular funds?  I also read something particular to this plan about having to divvy up contributions to this plan per paycheck?

  • #2
    It is reasonable. Two issues: your tax rate is overly conservative. The 35% for federal income tax is marginal. For this drill you need to look at your effective tax rate (probably closer to 25%). Another thing you did not mention is your intended asset allocation across your various investments. A complete plan would include that to match your goals.

    Additional funds: do you have access to a 457 at work? If not, extra investment funds may just have to a taxable account. Not a bad thing. Just start a total stock market index fund with low expense ratios at Vanguard or fidelity.

    Old plans: Roll over Roth money to you individual Roth account. Roll over old 401a to your work 401k ( if it accepts). You could roll to your individual IRA, but then you would incur a pro rata distribution burden on your backdoor Roth transactions, which it would obviously be best to avoid.


    • #3
      Your approach is reasonable. My concern would be the accuracy of some estimates.
      You can calculate the net paycheck with your pretax deductions and the fica, Medicare etc. You mentioned filing jointly last year, The split of the taxes may not match up with the single computation. Run both.
      Healthcare, DI (do you have your own policy),auto (including replacement) are easy to miscalculate.
      (Gross + employer contribution ) x 20% = target retirement savings.
      • The loans mean for 5 years you will have significantly less available to spend or save but still want to stick with the 50/50 expense split. Your approach of keeping finances separate is reasonable, but the sooner the loans are gone the better.


      • #4

        Overall – thoughts? Is this reasonable? Should I be allocating more towards retirement?
        Click to expand...

        so for married couples i dont subscribe to the theirs/mine/separate train. its subobtimal when it comes to doing what you are trying to do: figure out taxes, retirement, and shared goals (home, vacation, etc)

        so to simplify

        - what is the total household income? you cant figure out your taxes alone without taking account of your spouse.

        - 20% of that needs to go to retirement (2x 401k, 2x bdrIRA, taxable)

        - assuming you are W2 start learning how to calculate taxes, and check up on your W4 every few months and adjust as needed. learn about safe harbor as well.

        - efund which sounds like youve done.

        - the rest goes towards loans. 5 years is not a terribly long plan, but it could be done sooner. refinance and plug away.

        - old plans can be moved to new workplace plans assuming better options.

        - then figure out your AA, and overall plan for funds. hence why split makes little sense.....basically your FI portion can be all G fund in TSP. then either C or I fund and your rIRA is all stocks. read here:




        • #5
          I am not sure how this paying off loans by yourself and splitting costs down the middle would work in the long run. I am unsure if you are the male or female in this relationship but let us assume that you are the male.

          What happens in the future if the wife wants to take time off to raise children.  Do you allocate some monetary value to that? What happens when one of you far has far more income than the other. - do they pay the same split and get to keep more for yourself?

          I can see dual earners keeping some spending money as they wish without criticism from the other but the rest should be in a common pool.




          • #6
            Larry mentioned the 457 plan. Also read the summary plan document of your 401k plan...request is from your to-be-employer. See if it allows you to deposit "after tax" funds and also allows for in-service withdrawals of the plan. If it does, you have access to the megabackdoor Roth IRA (google that on this site) which should be done before taxable. While you're at it, does your SI also have access to the 457 plan and/or the megabackdoor Roth?

            You should put at least 20% towards retirement, based on your gross salaries. You said you are $300k. Is your spouse also $300k? Assume SI is. So you need to put $120k away total. If there's an employer match on either/both 401ks, include that in your numerator and your denominator. If your employer gives you each $10k match then your denominator is now $620k and your numerator should be $124k. Of that $124k, your employers put in $20k so you need to put away an addition $104k.


            • #7
              Assuming you are a federal employee (can other people contribute to the TSP?) with at least 5-6 years of training. Wouldn't PSLF be a good option for you?

              I'm a random internet stranger, but I'm a one pot family. We have completely assymetric debt like you. You'll get more opinions about this than you care for probably.